Credit Management Problems

Maintaining proper credit can be a boon to an individual or business. Poor credit management can be its downfall. Credit can be dangerous to someone who misuses it. Often, by the time you realize you're in trouble, it's already too late. Recognizing the elements of poor credit management can help you avoid it.

Paying Late

If you make your payments late, you have a credit management problem. This indicates you don't have the cash flow to support the payments or you don't have a handle on your payment schedule. Either way, you have a problem. If your cash flow is insufficient, rework your budget to handle the obligations. If you don't know your payment due dates, take the time to list them chronologically. Make sure the due dates are reflected in your budget so that you don't end up with insufficient funds.

Maintaining Balances

One of the biggest problems with credit management is letting it grow. When balances grow without reduction, you have a major credit management problem. As the obligation gets closer to the limit, it becomes apparent to the creditor that the debtor is having problems with repayment. This can lead to higher interest rates and a reduced credit limit. If you have reached the point where you rely on credit to get by, you can end up in a bad situation.

Living Beyond Your Means

Just because you are approved for a credit line does not mean you have a license to purchase big-ticket items you can't afford. Larger items carry larger monthly payments. A number of large items carry a number of large monthly payments. Misuse of credit combined with mismanagement of payments can spell disaster from a credit management standpoint.

Overuse

You have a credit management problem when you exhibit an over-reliance on credit. An example is an individual who uses credit cards to pay utility bills or a person who constantly transfers balances. No matter what type of temporary relief these methods provide, it will catch up to you in the end. Only a balanced budget and proper use of credit will keep you out of trouble.