Credit is a valuable tool you can use for emergency expenses or to make large purchases such as cars and houses. However, abusing credit can wreak havoc on your finances, leading to foreclosures, repossession, lawsuits and bankruptcy. Credit problems also lower your credit score, affecting your ability to get credit in the future. You can avoid the worst effects of credit issues by picking up on the first warning signs of trouble.
High Interest Rates
When you make a late payment, or fail to make a payment at all, a credit card company may raise your interest rate to compensate for the additional risk they take for keeping you are a cardholder. Look at your statement to determine your current interest rate. If it is over 20 percent, pay the balance down and make future payments on time. Call the card issuer after six months of steady payments to request a lower interest rate.
Unaware of Total Debt Amount
If you don't know exactly what you owe, you will likely make the mistake of thinking you can handle additional credit when, in fact, you are already overextended. Go through all creditor bills and statements and add the balances to find your total debt amount. Create a plan to pay it off and keep track of your balances each month.
Seeking Additional Credit
People who have trouble paying their debts often apply for additional credit to help pay the existing balances, sometimes referred to as "robbing Peter to pay Paul." This is a dangerous credit waring sign because it means you don't have the income to cover your debts and additional credit will likely make the situation worse. Look at your household budget to determine if you can cut any expenses and look into getting a part-time job to boost your income until you get the balances down to a manageable level.
Creditor Calls
When you miss more than one payment, creditor will often start calling to inquire about payment. You can still salvage your credit history if you talk to your creditors when they first start calling and work out a plan to bring your account current. Ignoring the calls will make creditors less likely to work with you later on. Continued refusal to talk to creditors can cause them to send the account to a collections, putting a ding on your credit report.
Only Paying the Minimum
You may be in credit trouble if you can only afford to pay the minimum amount due on your debts each month. This means you don't have the income to effectively pay down your debts. Paying only the minimum extends the length of time it takes to pay off the debt and, in turn, increases the total amount of interest you pay over the life of the account.
0 comments:
Post a Comment