Cassandra Hubbart, AOL
If you're juggling several sources of debt -- and these days, who isn't? -- experts will tell you to chip away at high-interest accounts first. But realize that everything from unpaid parking tickets to library fines can wind up on your credit report. "Look out for smaller bills that you may have overlooked," Davis cautions. She recommends extra vigilance after a move; a few leftover pennies on your utility bill may haunt your credit report for years.
If you're having trouble keeping up with payments, resist the urge to stash your past-due notices at the bottom of a drawer. Instead, contact your lender and ask for a little lenience. "The truth is, more lenders are willing to be flexible right now," Levin says. "But you're never going to know unless you talk to them. The worst thing they can say is no, so don't be afraid to call and ask."
5. Consolidating Your Loans
Merging your debts might make it easier to keep track of bills, and it could help you avoid astronomical interest rates. But lumping all of your loans together can also reduce your debt ratio if you're not careful.
Arnold offers this example: Say you have three credit cards, each with a $3,000 balance; if you transfer those balances to a zero-interest card with a $10,000 credit line, you're suddenly using a whopping 90 percent of the credit on the new account. "You've got great intentions, but it could tank your score potentially," Arnold says. You may also be hit with hefty interest rates after the card's introductory period ends, which will increase the amount you owe. But consolidating isn't always a bad idea -- if you do your research and find a good rate, you could save thousands in interest, and that might offset any resultant blip in your credit score.
6. Charging Everything
With credit cards offering attractive rewards programs, it may be tempting to put every purchase on plastic. But even if you pay your balance in full every month, racking up too much debt can wreck your score -- you'll get points for paying on time, but your credit report will show a consistently high balance.
"If you have an unusually large balance, it may not be a bad idea to pay early just to keep it as low as possible," explains Levin. There's also a scary side note to your spending. Some credit card companies track where customers shop and penalize them for purchases that could signal financial difficulties.
Swipe your card at a red-flagged establishment -- such as a discount store, auto repair shop, even a marriage counselor -- and your creditor may lop your credit line or hike up rates. "Whether it's right or wrong, fair or not fair, that's the way it is," Levin advises.
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