Credit troubles can happen gradually or virtually overnight due to loss of income or costly emergencies. Regardless of the reason, there are signs that credit problems have become unmanageable. With careful budgeting and possibly outside professional help, you can get back on track financially and take control of your credit and debt.
Financial Signs
Some signs of debt and credit trouble are readily apparent from a financial perspective. Living paycheck to paycheck and only making the minimum monthly payments toward credit cards and loans are early problem signs. Adversely, continually borrowing from one credit source to make payments on another and "maxing out" your credit limits are more problematic, as these actions cause your debt to increase each month.
Credit Usage
Relying on credit to help pay the bills each month or to buy basic living items indicates a financially dangerous debt-to-income or debt-to-spending ratio. Michigan State Housing Development Authority recommends keeping your consumer debt payments below 20 percent of your net income. Additionally, frequently applying for new credit cards or loans to shuffle debt from one source to another may indicate credit problems.
Other Symptoms
Obvious signs of credit problems are debt collection calls, high interest rates, late fees and over-the-limit penalties due to late payments. Continuously worrying about bills and stressing about how you are going to make payments each month is a sure sign of credit troubles. Lying about how much you spend and how much you owe damages more than your finances, as hiding credit troubles from your spouse or partner may cause relationship problems.
Budgeting Concerns
Not having a monthly budget and a workable plan to pay off burdensome debt is a sign of credit trouble. Having no idea how much you owe or avoiding calculating your debts out of fear indicates a more serious problem. If you have little or no savings or retirement funds due to debt, you're setting yourself up for future financial problems.
Getting Help
The Federal Trade Commission suggests using the services of a reputable credit counseling agency to help create a budget, provide financial education and work out payment plans with creditors. The FTC cautions against credit repair clinics or debt relief companies that charge upfront fees, make unreasonable claims or "guarantee" to eliminate debt, or any agency that doesn't fully disclose the entire credit plan, including the total cost.
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