Credit cards are great financial tools but they carry a lot of responsibility. Credit cards are loans. They don't give you more money, but simply change the way you pay.
Credit
delinquency may prevent you from qualifying for future loans, such as
a mortgage or auto loan. Bad credit can also affect your job. With your permission,
employers sometimes use credit reports when they hire or evaluate employees
for promotion, reassignment or retention. You should know what is
on
your credit report before
you apply for credit. Request a copy
of your credit report to keep track of your financial history.
If you are denied credit because of information contained in your credit report, federal law requires the creditor to provide you with the name, address and telephone number of the credit bureau that supplied the information. If you contact that credit bureau within 60 days of your denial, you qualify for a free copy of your credit report. Review your report closely to ensure the information is accurate. If you locate errors, you are entitled to have it investigated by the credit bureau and corrected free of charge.
It is essential that you understand the terms and conditions of your credit card. Always review the disclosures included with your application and card carriers. Call the credit issuer for further clarification if you have any questions about the terms of the card.
How Much Debt Can I Afford?
It is important to ask yourself, "How much debt can I afford?" The answer lies in a calculation of your debt-to-income-ratio. Simply put, you divide the total amount of your debts by the total amount of your gross income.
For example:
Mike and Judy's total gross income per month = $2,000.
Their total debts per month (including mortage or rent) = $700.
$700 divided by $2,000 = 0.35 (or 35%).
If you are a homeowner your debt to income ratio is recommended to be = below 36%
If you are a renter your debt to income ratio is recommended to be = below 26%
Total Monthly Debt ÷ Gross Monthly Income = Debt-To-Income Ratio
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