Improve Credit Score by Rebuilding Your Discipline Using Your Credit Cards

The road to financial health is a journey that can begin with simple, relatively painless steps. One way to get started is to apply a systematic approach to making your credit card payments. Improve your credit score by rebuilding your discipline.

If you find your credit card balances are growing uncomfortably large, the first step to reducing them is to make sure they stop building. First, hold the balances constant, and then when you are able to accomplish that, you can begin to work on getting out of debt altogether. One of the evils of credit card debt, besides the high interest rate, is that the lender charges interest on interest. They apply a finance charge to this months balance, then next month if you haven't paid the balance off, last month's interest becomes part of this month's principal balance, which in turn they apply the finance charge to.

You can stop this problem in its tracks by doing the following: To calculate the payment you want to make, add up the current month's expenditures on the card, this month's finance charges, and whatever contribution you want to make to reduce the principal balance. The contribution could be minor, $20 at first. The point is, you are not allowing the principal balance to build up any longer. And you are beginning to learn the discipline of paying for what you purchase each month. In the end that's your goal: to have no finance charges at all to pay, because you do not carry over and debt from month to month.

Another way to stop credit card build up is to review what you usually spend on lunches, coffee, groceries, etc using your credit card. Put the monthly amount in cash in marked envelopes. Each week take out one fourth of the amount for that week's expenses. If you run out of money before the week's end you'll just have to make do by bringing your lunch rather than buying it, or stretching out the groceries you already have in the house.

If you apply this method, over a few months it will become automatic. And having to pay the current charges each month will have the subtle effect of getting you to reduce the number of purchases you make, because you want to have a monthly payment as low as possible.

This goes back to the original concept of credit cards: a means to facilitate purchases where it was inconvenient to use cash. Credit cards, by virtue of their high interest rates, have never been ideal sources of long-term credit. They are best thought of as something to use in emergencies, for expenditures that are unforeseen.

The best approach to your regular monthly expenditures such as going out to lunch, or putting gas your vehicles, is to regard these purchases in the same way as cash expenditures, except you pay for them in a group several weeks after the expenditure was incurred.

Improve your credit score by paying for all your purchases every month.