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Ask Creditnet: Credit Card Use on a Fluctuating Income

Dear Creditnet: I need some expert advice. My credit score is in the low to mid 500's...sad i know! I have 7 credit cards that I use all the time, but they have low limits under $1,000. My work is commission only too, which often causes me to make late payments and then get hit with big fees. How can I better manage my credit cards and improve my credit scores?

Answer: Since your work is commission only and it sounds like you experience fluctuating income from month to month, I wouldn't recommend using credit cards for all your daily expenses at this point. At least not until you have enough saved in the bank to cover several month's worth of purchases.

An important part of responsible credit card use is to treat your card like cash. That means only buying something when you already have the cash in the bank to pay for it. So until you have enough saved to cover several month's of expenses, it's best to keep your current credit cards open and just use them for one small purchase a month. Buy everything else with cash so you'll never put yourself in a situation where you can't pay your credit card bills because you had a bad month of sales at work. You don't ever want to be in that situation again.

Next, set up auto pay on each credit card to make sure you always pay your bills in full and on time each month. Payment history accounts for 35% of your FICO score, so a history of on-time payments will have the greatest effect on your credit scores as time passes. It's also important that you only use about 10% or less of your available credit each month. The percentage of available credit you use accounts for 30% of your FICO score, so it's almost as vital to a good credit score as your payment history. I'm not sure what kind of balances you currently carry on your credit cards, which is also why I suggest only making one small purchase on each card per month until you acquire higher limits and have more income saved to cover expenses during lower-income months.  

When you have a fluctuating income, it's all about managing cash flow.  Good luck, and spend wisely!


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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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