The Right Way to Manage Your Credit Cards

Did you know that one in seven Americans has at least 10 credit cards? It's true. However, the average is four, according to a report from Experian.

According to Lawrence Finn, Jr., CEO Owner/Broker of Coach Real Estate Associates , usage on credit cards has dropped dramatically in the last two years as financially constrained consumers have reduced spending and begun paying off debt. The national average interest rate on credit cards as of August 2010 is 14.44%, up from 13.17% from six months earlier.

"Mortgage-seeking clients are always asking for advice on how they can improve their credit profile, such as the number of credit cards they should have," says Finn, Jr.. "It's important that consumers are educated about credit and how to properly manage it."

According to the credit experts at, however, it's not just the number of credit cards you have, but how you use and manage those cards.

Here are some critical tips for managing your credit cards in order to maximize your credit profile:

1. Use your credit cards regularly, but in small amounts, never exceeding 30% of your entire credit line. For example, if your card limit is $4,000, set a self-imposed limit to keep your balance at $1,200. 2. Even if you pay your bills on time, coming close to your full balance each month affects your credit score negatively. Regularly maxing out your card limit is a bad habit in the eyes of credit-rating firms. It's better to spread your credit charges out over two or three cards, keeping each balance at or below 30% of your total credit line. 3. Don't get rid of old cards even if they have higher interest rates than ones you may get on newer cards. Credit rating firms like to see a well-established history, so utilize your old cards every so often for small purchases. 4. On the flip side, avoid getting new cards, if possible. When you add a new credit card, your credit score will likely suffer a temporary drop until you have established a payment history with that card.

"Understanding how to manage your credit and your credit cards, specifically, is important toward keeping a good credit score and a stronger credit profile," says Finn, Jr.. "Getting a good handle on credit will put consumers on the right path toward lower interest rates and terms when applying for home loans."

Options for Avoiding Foreclosure

As the headlines tell us, foreclosures continue to plague our communities and our economy at large. According to Lawrence Finn, Jr., CEO Owner/Broker of Coach Real Estate Associates if you are one of the many homeowners struggling financially and confronting the possibility of a foreclosure, however, there are viable options you can pursue before relinquishing your home. "There are options worth pursuing for those facing possible foreclosure," explains Finn, Jr.. "Many banks, for example, offer loan modifications or other programs that can give homeowners a little more breathing room and a chance to get back on their feet." An experienced, professional real estate agent or counselors certified by the Department of Housing and Urban Development (HUD) can help you explore available options, says Finn, Jr., including: Forbearance. A forbearance is a temporary suspension of payments sometimes offered if a borrower has lost a job but has a new one starting soon – or because medical bills or another crisis situation has caused a temporary cash shortage. Repayment plan. Repayment plans offer a scheduled blueprint for making up missed payments over time. Loan modification. A loan modification is a change in loan terms for a limited time, as when a subprime interest rate has jumped considerably. Finn, Jr. also advises financially distressed homeowners to be extremely wary of anyone purporting to offer a "quick-fix" solution. According to the Federal Trade Commission, steer clear of anyone who: • Guarantees to stop the foreclosure process • Collects upfront fees • Asks to be paid by wire or cashier's check • Tells you not to contact your lender or lawyer • Wants you to make mortgage payments directly to him/her • Suggests you sign over or "share" your property deed or title • Proposes a lease-and-buyback arrangement • Offers to fill out paperwork for you • Pressures you to sign documents you do not fully understand "Unfortunately, there is a growing contingent of foreclosure scam artists preying on vulnerable homeowners," says Finn, Jr.. "Financially distressed homeowners should consult a real estate professional who can point them in the right direction and offer sound guidance on the potential options that can save their home from foreclosure."

Your Good Credit Score Might Not be Good Enough Anymore

There was a time when a 680 credit score yielded great interest rates for consumers. Today, however, according to, the best rates and mortgage programs go to those consumers with credit scores over 700. According to Lawrence Finn, Jr., CEO Owner/Broker, of Coach Real Estate Associates consumers with less than a 700 credit score may see additional fees of 1% or more and increased interest rates as high as 1% over the base rates. These increased fees and interest rates could mean about $3,500 in extra fees and as much as $134 a month in additional monthly mortgage payments for a new home buyer purchasing a $350,000 home. "Due to the tumultuous landscape of our current economy, many consumers are finding that their credit scores are dropping...even though they've continued to pay all their bills on time," says Finn, Jr.. "This is happening unknowingly to millions of consumers across the country that have good to excellent credit. Unfortunately, there are many factors now affecting consumers' credit scores that they're unaware of." For example, a consumer might have had their oldest and most established credit card closed by a creditor due to non-usage. Second, two other creditors may have dropped the consumer's available credit limits, which negatively impacted their credit utilization ratios (i.e., amount spent each month compared to the credit limit). In each case, these changes occurred for no other reason than the creditors' overall concern for risk in the marketplace. So what should you do? According to Finn, Jr. and the credit experts at ApprovalGUARD (, here are three suggestions to keep in mind: 1. Understand how credit works. Although you may think you understand how credit works (i.e., "As long as I pay all of my bills on time, I will have good credit"), there are many misunderstandings. Understanding how credit reports and scores work to create an excellent credit profile is important and becomes the foundation to strong financial self-management. 2. Credit and debt optimization. Take a snapshot of your current debt profile compared to your current income and liquid assets, then look for ways to optimize your debt. Examples could include strategies to reduce credit card balances owed to lower limits that will help you strengthen your credit scores, reduce interest rates and/or create opportunities to move balances to lower interest rate debt alternatives. 3. Know what's going on. It's important to review your credit at least three or four times per year. By doing so, you can monitor it for changes that may have occurred without your knowledge. It's also a great opportunity to self-monitor your profile for errors or suspect activity such as identity theft. The Fair Credit Reporting Act guarantees you access to a free credit report every 12 months. For more information visit the Federal Trade Commission website at Once on this page, click, "Free Credit Reports" for information on how to obtain your annual credit report from each of the three major credit reporting agencies free of charge. "Understanding, building and self-managing your credit is like changing the oil in your car," says Finn, Jr.. "If you do it regularly, then the car runs better. If you do it only when the engine has problems, you often find yourself in a challenging situation."

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