Consumerist's 10 Commandments of Credit

The Pope recently issued 10 commandments of driving, so we thought, “If the Pope can talk about driving from the back of his little popemobile, we can talk about credit.” So without further ado, Consumerist’s 10 Commandments of Credit. It’s not everything you need to know about using credit wisely, but it’s a good start.

The 10 Commandments Of Credit


1) Thou Shalt Pay Off Your Balance In Full Every Month.

Keeping a balance on a credit card is a sin in the eyes of the Consumerist. If you have a balance, make it your priority to pay it off as quickly as possible.

2) Thou Shalt Get A Credit Card With Extended Warranty Protection, Cash Back or Reward Points, And Thou Shalt Take Advantage Of Them.
Credit cards can be very useful tools for consumers. Extended Warranty Protection can double a manufacturer’s warranty and costs you nothing. Cash back, obviously, saves you cash. Reward points are useful for lots of things. Take advantage of these tools! They’re there for smart people like you.

3) Thou Shalt Check Your Credit Report.
Go to annualcreditreport.com to check your credit report. It’s free and you can do it once a year. If there’s something incorrect on the report, you can challenge it. Removing old or incorrect stuff from your credit report will cause your FICO score to rise, and that can save you money.

4) Thou Shalt Pay All Bills On Time.
Paying your bills on time helps your credit score and keeps you from having to pay fees. Do it!

5) Thou Shalt Avoid ID Theft. Buy And Use A Shredder, and Thou Shalt Not Fall For Phishing Scams.

ID Theft sucks. It’s not always your fault, but you can take simple steps to help prevent it. Be aware of phishing scams and don’t fall for them. Always type urls into your browser, don’t follow links from emails. Don’t save your banking passwords in your browser or on your computer. Buy and use a shredder. None of these steps takes much effort, but they go a long way towards protecting you. Sure, your credit card protects you from a lot of the financial damage from ID theft, but there’s no reason you can’t be responsible about protecting yourself.

6) Thou Shalt Take Advantage of No Interest No Payments Financing Deals, But Thou Shalt Pay Them Off On Time.

No interest, no payments financing can be great, but you’ve got to ignore the “no payments” part. Make payments. If you don’t, once the “no payments” period is over, you’re going to get hit with interest from the date of purchase… and that interest rate can be huge. Don’t do this! Use the “no payments” period to pay the item off, then you’ve used the store’s money for free.Yay!

7) Thou Shalt Avoid Interest On Consumer Debt. Thou Shalt Try To Pay Interest Only On Student Loans, Mortgages And Car Loans.

Sort of self-explanatory. It’s not a wise investment to be paying interest on soap and tacos. If you don’t have enough money to pay your balance off every month, look for ways to cut your spending.

8) Thou Shalt Keep Thine Credit Utilization At A Reasonable Level.

Credit utilization is important to your FICO score. Basically, you don’t want to use all the credit available to you. Don’t max out your credit! Lenders will approve you for more than you can afford. Remember that.

9) Thou Shalt Not Cancel Credit Cards, Thou Shalt Try To Keep Them Open So As Not To Shorten Thine Credit History.
Length of credit history is important to your FICO score. If you don’t want to use a card that you’ve had for a long time, that’s fine, but don’t actually cancel the card. Just don’t use it, unless it has an annual fee and you really want to get rid of it.

10) Thou Shalt Not Constantly Obsess Over Thine Credit Score. Life is too short.

Following these commandments should help your credit score, but remember that its not written in stone. It’s more of a snapshot than a grade. It can always go up and down, and it will. While it’s important to be mindful of your credit report, don’t let it ruin your life. Smile.

We know you have your own commandments to share, so leave them in the comments and help our readers learn about managing their credit wisely!
(Photo:MykReeve)

Comments

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  1. levenhopper says:

    Can you make a poll, asking how many people auctually do type links into their browser? I know I hear a lot of people saying to do that…but I never do.

    I’m curious who auctually does that….

  2. Jocasta236 says:

    @Levenhopper:

    *I* do. Because for the last three years, someone has stolen information that I didn’t catch…but the companies involved DID catch.

    Since my bill paying habits are fairly consistent, my credit card company caught not one, not two, but THREE instances of unauthorized usage. And they were from online purchases! Grrrr.

    Finally, my friend introduced me to McAfee Site Advisor. And reminded me not to depend on email links to go to websites.

    You see, not only did I manage to go to spoof sites, my lack of attention also killed both my desktop and my laptop. Viruses, trojans, rootkits, you name it.

    All because I cut corners and “saved time” by not going directly to the websites involved.

    But that’s just me, no everyone. I learned a #350 lesson this last time. I don’t even bother to go online to check my credit cards. I pick up the phone.

    I’m too scared anymore to do anything else.

    JoCasta

  3. tozmervo says:

    You mean, as opposed to clicking on email links? Well, me for one. I will do that or click on my own bookmark for said site (banking, etc). Clicking on email links is just a bad idea.

  4. Eric1285 says:

    I usually just check to see where the email link goes to. It’s pretty easy to spot which ones are phishing sites.

  5. tedyc03 says:

    A good idea too is to see that they provide some sort of identifying information in the e-mail about you…like first and last name, or last four of your account number. Glaring mistakes in grammar or spelling are pretty clear indications of a scam as well. Also, scams usually hint at some dire consequences for you not following the instructions provided…like your account will be closed or your credit will be affected. If you receive e-mails like this, ALWAYS call the business with a phone number that you got from someplace other than the e-mail (or links in the e-mail). And legitimate businesses with whom you have a relationship will NEVER ask you to confirm your social security number on their website or some crap like that.

    Best advice: be cautious, be vigilant, and be stingy with providing information.

    • Miguel Valdespino says:

      @tedyc03: Actually, it doesn’t matter if they have identifying information about you. It’s not too hard to get your full name. My friend had a scam that was so good that the branch manager of his bank thought it was legitimate. Luckily he was suspicious enough to check with another bank and they finally caught a detail that didn’t ring true.

  6. Crazytree says:

    everything is great but the only change I would make is that you shouldn’t be paying interest on any car loan: you shouldn’t drive any car you can’t afford to own.

  7. JDobbs says:

    Totally agree Crazytree.

  8. uricmu says:

    I have to say that I disagree with the point about using shredders to avoid identity theft. The risks of somebody going through your old documents that have your SSN in them is pretty low because there aren’t that many, except maybe for tax returns that nobody throws out.

    The real danger is electronic theft, where personal details can be taken en masse. In the past three years I’ve had a brokerage firm and a past employer (IBM) lose “media with SSNs”, often at the hands of “third parties” that handle this data.

    In addition, every doctor’s office you’ve ever been to has your full SSN. Want to bet that they don’t even know you’re supposed to fully wipe out a hard drive when you get rid of it ?

    One Pittsburgh hospital recently had these details along with people’s xrays posted on the internet.

    • Miguel Valdespino says:

      @uricmu: Shredders are pretty cheap. Think about all the pre-approved credit card offers you get. Or the bank statements that include the most significant digits of your account number. Or the credit cards that send you “convenience checks” that get charged at cash advance rates. And many other things.
      .
      In many cases they just get a few pieces of information and use social engineering to get the rest.

  9. shanmiles says:

    I just recently canceled one card (because I had another from the same company after they bought out another) and the credit history line was what their retention specialist used to try to get me to keep it open. But you’ve got to watch out for #9 – if you leave too many open you also get dinged on the other side. That is having too much consumer credit also lowers your score. Having just bought a house I saw 1st hand what things I was getting dinged for and having too many cards was one.

  10. Crazytree says:

    @uricmu: I have urchins that go through all the dumpsters in this entire city. Shredding is a must.

  11. Natoma says:

    #1 is very bad advice for anyone looking to improve their credit score. Why? Because the credit card companies report your balance at the end of your statement period.

    If you have a $0 balance at that time, month after month, your credit score is actually impacted in a slightly negative way.

    Why? A credit score is a snapshot of your capability to pay back debt. If you have no debt reported, ever, then you don’t have a payback history. If you don’t have a payback history, then your credit worthiness dips.

    It’s not terrible to buy something and then wait until a day or so after the closing period to pay off the balance. Just to show on your credit history that you have a history of payments.

    That will help far more than having no credit history of payments on your record.

  12. morydd says:

    7) Thou Shalt Avoid Interest On Consumer Debt. Thou Shalt Try To Pay Interest Only On Student Loans, Mortgages And Car Loans.

    Are car loans somehow not consumer debt?

    • Miguel Valdespino says:

      @morydd: Yes, but many people end up in the situation where they need to buy a car without having the full value saved up. Therefore they have to borrow on it. Or people who get a good deal on financing their car that’s lower than they are earning on their investments. I’ve known people who’ve made some pretty good money by financing a car.

  13. jetfxr27 says:

    You missed the most important one.
    Thou shall not have a credit card! Don’t waste you r time playing with silly banks. They spend millions on how to rip you off. You read a blog in your underwear and are a financial genius. Really, come on , focus on points , miles extended warranties??????

    Spend less than you make and invest in appreciating assets. Done!

  14. Islingtonian says:

    @jetfxr27: But simply having a credit card isn’t evil, which is what this post was saying. If you play the game right – pay the balance in full each month – credit cards can be very useful. Simply having the ‘chargeback’ function is helpful, along with extended warranties and even some insurance. You can get that for free if you have a card that doesn’t have an annual fee and which you pay off each month. Use them to make necessary expenditures, not to make big purchases that you don’t need.

    So, by using credit cards wisely you CAN spend less than you earn and invest the rest!

  15. j-o-h-n says:

    @jetfxr27: Having a credit card, provided you can use it responsibility, makes many things a whole lot easier (buying things online, renting a car, even renting motel rooms).

    • Miguel Valdespino says:

      @j-o-h-n: I agree. Everybody should have a credit card for multiple reasons. Reservations. Points/cashback. Extended warranties. Chargebacks. Emergency money that’s immediately available (which you pay off with the emergency fund in your bank). The convenience of not carrying large amounts of cash.

  16. humphrmi says:

    @morydd: I agree, paying interest on a depreciating asset is a losers game, but some people (including myself) are unable to pay cash for a car when we need one.

    My solution? Follow the other rules, and when you *need* a car, your credit score will be high enough that you can qualify for manufacturer’s promotional rates.

    My current (new) car is financed seven years at 0% through Chrysler Credit. So I meet the requirement of this commandment – although I have a loan, I am not paying interest on it.

  17. TPK says:

    This is good stuff. Using credit (even a credit card or two) is a part of living in the modern world. Sure, some people choose to live in a tent on the side of a mountain, but who wants to do that?

  18. Falconfire says:

    Credit is not a evil thing, people have used credit for thousands of years. Its being responsible about it thats key, which is what the list points out.

    And Im sorry but the truth is your better off leasing or buying a new car these days, than buying a used. It might be cheaper, and you might be able to pay for it with a loan, but your ALSO more likely to spend nearly 2-5 thousand dollars MORE money over the cost of the used car in repairs within 3-4 years. In the end your just deferring the money your spending on the car, rather than actually saving money which many of you assume you are. Sometimes you luck out, I know people who have 6 year old cars with only replacement brakes and tires and routine maintenance. But I know a lot more people who have actually junked a used car in 4 years because they fell apart (myself included despite meticulous care, in the end after two terrible instances with used cars, I got a lease and will never look back)

  19. Sudonum says:

    @levenhopper:
    I always type in my financial links.

    @Falconfire:
    Buy Certified Used. We’ve bought several certified used cars and got great deals on all of them (and paid cash). The latest was a one year old luxury SUV with 3500 miles on it with a 6 year, 100,000 mile bumper to bumper warranty. We paid a little over half of what a new one stickers for.

  20. timmus says:

    “In addition, every doctor’s office you’ve ever been to has your full SSN. “

    No they don’t. I always omit it from paperwork, and if they ask (which is extremely rare, only an ER did this), I flip some of the digits around. A doctor’s office does not need my SSN.

  21. Crazytree says:

    @jetfxr27: WORST comment ever posted on Consumerist.

    I have made THOUSANDS of dollars from my CC’s over the years, from 0% arbitrage to cashback for major business and personal purchases.

    Plus having a strong credit profile will help you get the best possible credit terms available from your mortgage bank.

  22. MarkMadsen'sDanceInstructor says:

    An excellent concise go-to list for CC dos and don’ts.

    Also, for those who choose to avoid credit, good for you. However, the advice to completely avoid credit is not good advice for most, due to the growing importance of FICO scores for everything from auto-loans to mortgage loans. So, if you wish to avoid the evils of CCs, go ahead, but stop trying to convert me.

  23. jetfxr27 says:

    @falconfire
    do you actually know what your talking about. Leasing is the most expensive way to operate a vehicle.
    @crazytree
    take a leap
    while your making “thousands” off your credit cards. Rofl,
    I am making hundreds of thousands, excuse me. Millions of dollars on mutual funds and real estate. Oh yeah my debit car works everywhere your cc does. I have no credit score and could care less for one. Its a measure of debt not wealth.

  24. Crazytree says:

    @jetfxr27: ROFL… you’re making millions in real estate? Me too… I own a unicorn ranch on the moon. I’M MAKING MILLIONS… so busy I barely have time to make snide comments on consumer blog sites. O_o

  25. velocipenguin says:

    @Falconfire:

    The secret to buying used cars: Don’t buy American.

    Actually, this applies to new cars as well.

  26. @velocipenguin: Hater.

  27. EtherealStrife says:

    @velocipenguin: Quiet fool, let the brainwashed rednecks continue to buy General Motors garbage. Japanese resale values (and new prices) are high enough as it is.

    I was in Detroit the other week and ended up talking cars with a relative. When I mentioned that I drive a Toyota: “They make those pretty good these days. Almost as good as American.” After several seconds of laughter, I realized he was serious.

    Awkward.

    As far as not paying interest, I make no exceptions. A fee is a fee, regardless of whether it’s for mortgage or a car or student loans. If you can’t afford something outright, save your money. With the 3 cent meals mentioned in another consumerist article there is no reason why you should ever have to pay interest on anything, regardless of your financial situation.

  28. rdytmire says:

    I agree, don’t use credit cards at ALL. I am one of those who is 40, does not own 1 credit card, carries no debt, and pays cash for everything.

    Seriously, you do NOT need a credit card to rent a car, reserve a hotel room, or any of the crap banks want to fill your heads with. (I even rent moving trucks without credit cards).

    If I want to buy / invest I come with cold hard cash. Believe me, cash always works (with surprisingly little hassle or paperwork).

    I guess credit is not a bad thing but COMPOUNDING interest is very very evil. My wife and I simply do not live above our means and keep 12-18 months of expenses in silver / gold (NOT in a bank…geez don’t keep ANYTHING in a bank folks).

  29. The Bigger Unit says:

    Ahh yes, claims of making millions, but unable to differentiate between “your” and “you’re”. I love that kind of stuff.

  30. dextrone says:

    VELOCIPENGUIN :

    Brilliant…..

    ANGRYSICILIAN: I see you have the opposite opinion {lol}

    ETHEREALSTRIF: The USA USED to make good things, but very few, now when the USA makes something I doubt it’s good at all.

    2 worst car makers: American+Chinese {hmm, there seems to be a relationship with the two}

  31. j-o-h-n says:

    @Jeff from LA: “”he advice to completely avoid credit is not good advice for most, due to the growing importance of FICO scores for everything from auto-loans to mortgage loans”

    It’s not just loans now either — my home and auto insurance rates are now partially based on my FICO score — so unless you want to avoid those too..

  32. olegna says:

    Amendment to No. 5:

    Thou shall also immediately call your credit card co’s and order them *not to ask prompt questions* (what’s your mother’s maiden name, etc.) for your account, lest you end up like this lady:

    [angeloyoung.com]

  33. Secularsage says:

    @jetfxr27: “while your making “thousands” off your credit cards. Rofl,
    I am making hundreds of thousands, excuse me. Millions of dollars on mutual funds and real estate.”

    Is it hundreds of thousands, or millions? Seems like someone who’s such a financial genius should know EXACTLY. Unless it’s a fish story that is getting bigger and bigger, which I suspect it is.

    You claim you’re making all this money in real estate and mutual funds? Do YOU know what you’re talking about, my friend? The mutual fund market isn’t doing very well right now (there are many articles out there talking about how you CAN’T make good returns through them unless you’re in it for the long term), and we all know about the housing market.

    If you’re going to troll, go for it, and have fun. But don’t act like you’re an authority when it’s clear, from your awful grammar and your immature ideas, that you’re an idiot

  34. B says:

    For those of you who are afraid to pay interest on homes, just remember that renting an apartment is the same thing as leasing a car. In both cases you’re spending money for the privilege of using something that doesn’t belong to you.

  35. billhelm says:

    i wouldn’t include car loans in with student loans and mortgages, simply for the fact that the interest paid on them is not tax deductible.

  36. SadSam says:

    I don’t think credit is per se bad or evil. I always paid of my credit card in full and enjoyed the free airline tickets and other perks. But, when I switched from using credit to using my debit card my spending habits changed dramatically. Instead of spending on average, over the cours of a number of years, approximately $20,000 a year in credit card charges plus $5000 or so in debit card charges, this year I am on track to spend $0 on my credit card and approximately $1000 a month in debit card spending (or $12,000 a year). The difference is when I’m spending money that comes right out of my checking account I think about it a lot more than when I ‘charged’ something and didn’t think about it again until the statement arrived.

    I’m sure that I will use credit cards in the future, for travel or for large 0% purchases, but I won’t ever go back to using credit for day to day expenses and services.

  37. Homage says:

    I read a bunch a Thou Shalts and Forsooths and alla that about Digg last week. It was one of the most irritating things I’ve ever read.

    Funnily enough this list didn’t have that effect. Must be cause this is a really inneresting list. Awesome.

  38. jetfxr27 says:

    @secularsage.
    You got me on the grammar. I was posting from my phone.
    I also agree I am not the best writer. However I believe personal finance isn’t nearly as complicated as people make it. Or the banks have you believe. Spend less than you make, invest the rest.
    When I speak of investments I always speak in long term. So yes, I am on track for retirement in the 1-2 Million dollar area. I am achieving this through mutual funds and real estate

    Ask the next millionaire you meet how many points he earned of his credit card. Or how many miles or cashback he received last month.

    Consumer Debt has come from almost taboo, pre 1950′s to the most heavily marketed product today.

    You can spend your life paying interest or spend your life receiving interest.

  39. Pelagius says:

    @morydd: Exactly. How exactly a car a “wise investment”? How about this – Though shalt buy a means of transportation that is within thy financial means.

  40. Mary says:

    I’m a little confused. I have several credit cards, some from “major” companies, and some from individual stores. My husband has another “major” credit card.

    We never use any of them, and quite frankly almost every single one of them was horribly rude to me and made me decide to never give them any more money, even if I paid it off in 30 days.

    We’ve kept these cards for a few years after paying the balances, but what I’d like to do is get a card that actually has benefits we would USE, and hopefully a larger credit limit, and cancel these smaller cards.

    I’ve heard that having credit you’re not using is good, but I don’t like having open accounts and I’ve heard that keeping these cards around for too long, or having too many cards with small limits will also hurt me in the end. It also seems to open me up for fraud to have accounts I don’t use.

    What the heck is the best solution then? My plan until I read this was to cancel all of them and get one larger, better card to actually keep up with and use.

    Also, to the people saying don’t have a credit card. Good luck with that, my husband tried that and it was not a happy picture when you combined his complete and total lack of credit with my bad credit. We’re getting back towards average now, but not having credit cards hasn’t done us a single favor. Pay the balance off every month, yes. But avoid them entirely? At your own risk.

  41. kaikhor says:

    This post reminded me of a phishing scam from the weekend. First, don’t worry, I didn’t fall for it. Biggest reason why? The bank that was telling me to check my account and update my info is NOT the bank I use. I opened the email just to see how generic these things are, but obviously did not click the link. It amused me, in that, people actually fall for this? Type of way.

  42. MatthewVA says:

    Perhaps…Though shall learn about all fees associated with credit cards, from interest to interchange.

    My organization with Unfaircreditcardfees.com wants card companies to be more transparent but if they continue to refuse, we as consumers must become educated.

  43. synergy says:

    @velocipenguin: You beat me to it. I have a used Civic and it does depreciate, but not much. I got it when it was 3 years old, so the sucker before me had already paid for the larger chunk of the depreciation and that’s not much to begin with when you own a Civic.

  44. synergy says:

    You might want to be more specific on #5. Get a cross-cut or diamond-cut shredder. I have a relative who went through papers that were shredded with a strip-cut shredder, placed the pieces side by side, and got some important info on someone.

    I never said my relatives weren’t shady. :D

  45. coreyander says:

    @timmus: You really need to be careful with this!!! It is true that the doctor’s office doesn’t “need” your SSN, but you should never give a fictitious SSN to anyone, ever. The billing departments of hospitals and other health service providers furnish the information (such as SSN) you provide to the credit reporting agencies. Therefore, if you accidentally give the SSN of another individual to your doctor, you will run the risk of having your entire credit report fused with the actual bearer of the SSN you provided.

  46. Eugene says:

    #1 I have found that carrying a small balance helps improve my credit score vs paying off at the end of each month. So I choose one credit card with a good rate, good rewards, etc and every so often I buy something on it and pay it off over a few months just to pay a little bit of interest to ‘buy’ myself a higher credit score. If I wasn;t planning on moving soon I wouldn’t do it but I want my score as high as possible now because every little bit helps on a 30 year mortgage.
    #5 Buy and use a shredder. A shredder does no good before the mail gets in your hands. Most of my mail ends up in my neighbors yard before it ever hits my mailbox, a sredder won’t help at all there. I switch to paperless statements to prevent the paper from going out through the system and then log on and download my statements in a secure environment.

  47. tiffany says:

    shanmiles said: “That is having too much consumer credit also lowers your score”

    not true. what matters is not having too many cards, it’s having too many cards that are carrying a balance. or you may have trouble if you have too many accounts opened for too short a time.

    bill said: “i wouldn’t include car loans in with student loans and mortgages, simply for the fact that the interest paid on them is not tax deductible.”

    i would: most people need a car to get back and forth to work. if you don’t have transportation to work, you can say goodbye to your house.

    and foo on a shredder. i agree with eugene: switch to online statements and payments: fewer human hands for your info to pass through. less risk of check washing scams.

  48. LankanDude says:

    Hey Guys,

    I need some advice.
    Recently I got my first credit card in USA with no credit history and I’m in the process of building a credit history for my self.

    This Credit card has a very low limit and my monthly expense is about twice that amount. So I pay it off entirely about 2 or 3 times a month.

    - Is this a good practice?
    - Will I hurt my credit score by doing this?

  49. peters4n6 says:

    I’ve been tempted to use one of those 0% or 0.9% interest checks that my credit card company throws into my statements every couple of months. My strategy would be to pay down my 15K home equity line-of-credit balance (which is at ~8% interest right now) Just like making 8% on my money!! At the end of the six months i’ll write a check from the HELOC and viola! money saved. With all that said, I don’t feel comfortable pulling the trigger…..:)