Signs that you have credit problems
Credit problems often begin with poor spending control. It's easy to be tempted to buy more than you can afford.
You can become so overcommitted to debt payments that other demands on your income suffer, and your inability to repay current debts can hurt your chances for obtaining credit in the future.
Here are signs that debts may be getting out of control:
- You allow some bills to hold over to the next month because there's not enough money to go around.
- You pay only the minimum due on charge accounts.
- You have to charge purchases more than you like because of lack of cash.
- You have to use your savings or cash from credit card advances to pay current expenses.
- You take out a new loan before old ones are paid off.
- You cut back on necessities in order to make installment payments.
- You pay only the minimum due on charge accounts.
- You have to charge purchases more than you like because of lack of cash.
- You have to use your savings or cash from credit card advances to pay current expenses.
- You take out a new loan before old ones are paid off.
- You cut back on necessities in order to make installment payments.
Many factors can make you unable to meet your credit obligations financial mismanagement, increased cost of living, unemployment, family emergencies and overspending are just a few of the more common possibilities. Once you know that financial difficulties are approaching, contact your creditors; don't wait until you're late with payments. Explain your situation and try to come to some type of agreement such as reduced payments, refinancing for a longer period or temporarily skipping a payment until you're able to honor your obligations.
Next you'll want to try to increase your income. You may choose to work extra hours, increase the number of workers in the household or cut living expenses. Don't consider taking out a consolidation loan (one large loan used to pay off the smaller ones) unless you are extremely pressed.
Because of the long-term effects it will have on your financial standing, bankruptcy should be considered only after all other options are exhausted. Most adverse information maintained by the credit bureau may be reported for only seven years. Bankruptcy, however, may be reported for up to 10 years. This may make it difficult for you to receive future loans.
How much credit can you afford? There is no ideal formula that applies to everyone; the amount will vary depending on your family's current financial status and future prospects. It has often been suggested that your debt level should not exceed 20 percent of your household income. A more accurate method is to review your household's budget to determine how much money you have left each month that could go toward a credit obligation.
For most of us, credit is fundamental to achieving our desired standard of living. But at the same time, it's absolutely critical that you assess your use of credit and keep your level of personal debt under control. Make sure you know what your use of credit is costing you, and contact your creditors immediately if you're facing difficulties meeting your obligations.
tags: credit, problems, signs
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