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Jump-start your credit profile: A 2-min guide to leverage credit cards

PETERSON AIR FORCE BASE, Colo. -- Credit cards can be an integral part of one's personal finances. They can provide free short-term credit, build credit scores, help consumers track spending, and can provide purchase protection, extra insurance and warranty extensions. In order to be responsible credit users, it's important that people are knowledgeable about lines of credit, credit card benefits, and especially, credit scores.

Credit cards can make or break a credit score. Paying credit card bills on time every month and maintaining long-term lines are key to raising credit scores.

Monthly credit card debt should never exceed one-third of the total line of credit. This keeps debt-to-credit ratios low, which is very important for calculating credit scores. When used responsibly, credit cards can actually work to save the consumer money.

A high credit score might save someone thousands of dollars over the life of a home or car loan because the annual percentage rate could be much lower. Banks and lending facilities historically lend money at a lower rate to those who are a lower risk, and the credit score is the paramount factor for evaluating credit risk. Credit card users need to be diligent and responsible with credit cards to build credit scores.

Many credit card companies offer warranty extensions. For example, the manufacturer's warranty for a large-screen television might be one year from purchase date. If a credit card was used to purchase the television, the credit card company may automatically extend a warranty by another year, doubling the owner's protection. If the item breaks after the manufacturer's warranty but within the extra credit card warranty, the credit card company may reimburse the full purchase price. Using a credit card to book plane tickets or other travel purchases could also provide special benefits like flight change, luggage and traveler's insurance. Review the credit card agreement and contact the company to learn about all the benefits available.

Beyond warranty extensions, credit card purchases protect consumers from fraud and billing errors. If a merchant overcharges a credit card, or charges for goods or services not purchased, the credit card company can be a consumer's best advocate to dispute erroneous charges. Notify credit card companies of a billing error, and they will investigate the charge and possibly correct it. Credit card companies have better contacts, more experience and stronger leverage to investigate and dispute charges.

Despite all these benefits, the most important rule with credit cards is to make sure the balance is paid in full, on time each month. This is the only way using a credit card will not cost a customer money.

To help consumers stay informed of credit scores, each year consumers can download a free credit report through Monitor this information for accuracy, and notify the credit rating agencies of any errors immediately. If used responsibly, credit cards can streamline, organize, protect and strengthen personal finances. If improperly used, credit cards can be a liability. Being informed and empowered is the most useful thing one can do in order to protect his credit scores.

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