January 12,2009
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Fearing Fear Itself, Pt.4 –
– Self-Control."I'm afraid I'll go crazy again with a credit card": Unless you're an excessive compulsive, there may be a system that works for you. One simple way is to keep the credit card in a safe place in your home and only carry it for one specific purpose on a purchase that you know you can pay in full when the next statement arrives. Make sure to always pay it in full. Also, be sure and not carry the credit card on you at any other time. By doing this, you will not only form a healthy routine but may also benefit from some of the rewards that the lender may offer like airline miles or even having some money put back into your account.
Always remember that the real damage is caused by missing payments and getting in over your head wuth credit card debt. Create a strong resolve to never allow either of these to happen. Between the two, you're looking at 65% of the significance in determining your FICO Score (up or down). That's a lot of control and can really work to your stead. Your outstanding balance on the credit card must never exceed 33% of your limit. It used to be up to 50% but, things have changed now.
Other categories of lesser concern to your credit score are: How long you've shown you're responsible with credit; ‘Hard' inquiries where you're seriously evaluated (like credit applications) and; the types of credit cards you carry (industry-level like VISA and MasterCard count more than store-branded cards like JC Penny's). Debt behavior counts the most.
If you're still uneasy about the control, just ask the credit card lender to lower your spending limit. Depending on your level of confidence, consider asking for three times the amount you believe you can catch up on and then limit your spending to one-third of that amount (33% debt ratio is considered healthy to the lenders, but not more).
If you're afraid of exceeding that 33% level, then ask the lender to lower your limit to the max you can pay back in a short. Whatever you do, NEVER spend over your limit. Consider using ‘secured credit cards' or gift cards, if this is still too risky. With each of these, you pay the money up front. The difference is that ‘secured credit cards' are treated much like conventional cards but with less-severe penalties. They're also much easer to obtain.