Understanding and Using Credit

Credit Dos and Doníts

Credit is a convenient financial tool. If you use credit, it is critical to understand how it works and know the reality and responsibility of repaying your debt.


  • DO shop around. The credit card industry is very competitive, so compare interest rates, credit limits, grace periods, annual fees, terms and conditions.
  • DO use the same name when you apply for credit. Donít leave out middle initials or ďJr.Ē
  • DO read the fine print on the credit application. The application is a contract, so read it thoroughly before signing. Watch for terms such as ďintroductory rateĒ and when that rate of interest expires.
  • DO ask questions. If you donít understand something, ask.
  • DO set a budget and stick to it. Developing a financial plan will help you keep your finances in order.
  • DO be wary of anyone who claims they can ďfixĒ your credit. The only thing that can fix a credit report is time, and a positive payment history.
  • DO open your bill and pay it on time every month. This helps you avoid late fees and keeps your credit history ó and credit score ó good. It also helps protect you from identity theft and unauthorized charges.
  • DO pay at least the minimum due. Paying above the minimum due is a much better idea, and making a plan to reduce the level of debt is better still.
  • DO contact your credit card issuer if you have trouble making payments. The issuer may work with you to create a payment plan you can more easily manage.
  • DO be careful with your credit card. Keep it secure. Always have your card issuerís phone number available in case your card is lost or stolen.
  • DO view credit as an investment in your future. By using credit wisely, you can build a good credit history. This allows you to rent an apartment, get a job, purchase a car and buy a home.
  • DO order a copy of your credit report annually. Your credit report is like an academic report card ó it evaluates your performance as a credit customer. It needs to be accurate so you can apply for other loans.


  • DONíT feel pressure to get a credit card if you donít want one. A credit card may not be right for you. Donít be afraid to say ďnoĒ to salespeople. Itís ok to walk away.
  • DONíT open many credit accounts in a short period of time. It will hurt your credit score and may make credit more expensive.
  • DONíT pay your bills late. Late payments can hurt your credit rating and a late fee will be charged.
  • DONíT spend more than you can afford. A credit card is not magic money; itís a loan with an obligation to repay. Realize the difference between needs and wants. Do you really need that CD or pizza? If you charge these items and only pay the minimum, you could be paying for those items months from now.
  • DONíT reach your credit limit or ďmax outĒ your cards.
  • DONíT apply for more credit cards if you already have balances on others.
  • DONíT ignore the warning signs of credit trouble. If you pay only the minimum balance, pay late or use cash-advances to pay daily living expenses, you might be in the credit danger zone.
  • DONíT give out your credit card number unless youíve initiated the transaction. Be alert to identity thieves and scam artists.

© Copyright 2006 American Bankers Association, 1120 Connecticut Ave NW, Washington, DC 20036. All rights reserved.