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Getting our first credit cards has always been memorable. Most people probably still remember the first time they held their newly activated credit cards. The rush of excitement upon the thought of the things we could finally buy will always remain unforgettable. Not only can we buy these things now, we can also pay for our bills without having to shell out cash. It instantly gave us a misleading sense of freedom, as if we can do anything, and as if we can do all this for free. However, reality hits us hard as soon as we receive that first ever bill and realize how much debt we have. Knowing how much you owe your credit card issuer makes you realize how big of a responsibility having a credit card is. While a credit card inarguably offers great aid in time of emergencies and financial crunches, consumers tend to forget the accountability it entails once excitement kicks in. Once consumers get too anxious, they may easily go beyond their payment capabilities and find it difficult to settle their debts later on. And without a regular credit check, this easily results to bad credit. And with all the rising interest rates and late charges, you could possible stay indebted for years if you remain negligent of checking your credit score regularly and understanding the factors affecting it.

4 Factors Affecting Your Credit Score

One of the most effective ways in addressing a problematic financial situation is to analyze the factors affecting the predicament. People deal with financial troubles every day; however, we can always choose to follow smarter ways to financial management instead of merely allowing ourselves in a helpless financial mess. The following are 4 factors that either make a good or bad credit score that you should remember:

1. Spending within your Discretionary Income –Your gross income less taxes is your disposable income. Compute all your monthly expenses like rent and utilities. Subtract this from your disposable income and you get your discretionary income. Charging more than this amount will make you broke in no time and will definitely tarnish your credit history.
   
   
2. Regulating your spending – Never be deceived by the VIP, Gold or Exclusive card packages that seem to offer limitless credit. While the credit limits of these card categories are usually undisclosed, this does not mean that the card is limitless. This is usually card companies’ strategy in suggesting the impression that a cardholder can spend away as much as he or she can. Reality will strike you as soon as you receive that bill. Unregulated spending due to credit limit misconceptions easily result to bad credit.
   
   
3. Payment - Minimum balances are very deceiving. It gives consumers the illusion that they will be okay just as long as they pay the minimum. Remember: your total amount due will never be paid off – and may even increase – if you will keep settling your minimum balance only. You would have to pay the total amount due in full to be debt-free. Also, never assume that your interest rates will stay low forever. Not only do interest charges fluctuate, they will also depend on your charging and payment behavior. Bottom line: Pay your dues on time and try to clear your total amount due as early as you can.
   
   
4. Wrong charging habits – Never charge on a different card without paying off the total due amount from the other. You should always clear your balances before making more purchases. Better yet, never max out one credit card and use it as a reason for using the other. Furthermore, it is always wrong to allow other to charge on your credit card. This is very dangerous especially considering the risks of identity theft. Always treat your credit card as your property. Besides, it’s not your friends’ credit score that will suffer if they fail to pay, but yours.

Having debt may be inevitable in a time like today; however, that does not mean that we have to stay indebted forever. Know the factors affecting your credit standing and be a responsible borrower by improving your credit behavior as well as your overall financial management strategy.

Kedy is an active blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances. Follow her to know the importance of getting an identity theft insurance and having a good credit score.