How Bad Credit Costs You

For all these reasons and more, it's critically important to manage your credit wisely and to control your debts. The debt you're carrying — particularly credit card debt — is inextricably linked to your credit rating. After all, your three-digit credit score is designed to tell a lender how likely you are to repay a loan.

So take time to do whatever is necessary to stay on top of your credit. Be sure to:

• check your credit reports at least once a year
• dispute mistakes in your credit files
• pay down credit card balances to boost your credit rating
• apply for credit only when you truly need it.
  

Above all, experts say you must pay your debts on time, preferably making more than minimum payments, because those payments primarily just go toward interest charges.

"To pay off your debt in a financially prudent way, you have to pay more
than the minimum payment," says Bill Hardekopf, CEO of LowCards.com
and author of The Credit Card Guidebook. "You pay more money toward
your debt, and save money on your interest payments. With any incremental money you receive or save, use it to immediately pay down your credit card debt. Make micropayments to help pay off as much of your debt as soon as
possible."

Again, ridding yourself of debt and strengthening your credit rating isn't rocket science. You'll have to get back to financial basics, and pay close attention to the ways in which credit impacts your life. It's worth the time and the money you'll save.

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, television and radio personality, and a regular contributor to AARP. You can follow her on Twitter and on Facebook.