Financial Management
 Keeping Your Finances Well Managed Is Important
The vast majority of credit problems begin when consumers start making their payments late. FICO reports that payment history (the factor with the heaviest weight) counts for 35% of your total credit score. For most, payments begin to arrive late as a result of over-spending and creating too much debt. Many don't even realize how serious their debt is until it is too late.
Are You in Debt Over Your Head?
The following are a few questions designed to help determine if your debt is significant enough to begin looking for help:
- Are you spending more than you earn a majority of the time?
- Do you often find that you can only afford to make minimum payments on credit cards?
- Have you reached your maximum credit limit on most of your credit cards?
- Are you unsure of your total debt among all sources?
- Do you know what your credit report says?
- Are you constantly shifting credit card balances through cash advances or balance transfers?
- Have you ever skipped one payment in order to make another?
- Do you use credit cards for every day purchases, like gas, groceries, or fast food?
- Do you find it difficult to talk about money with your spouse, friends, or family?
- Have you recently been turned down for a credit card or a loan?
- Does the thought of an unexpected expense, like car repairs, make you nervous?
- Have you received phone calls from creditors about overdue bills?
- Are you seriously considering filing for bankruptcy?
If you've answered yes to any of the above questions, this may be a sign that you are in debt over your head and need to look for a debt management solution before your credit suffers even more. The fact is that you are not alone. In 1996 alone, an estimated $715 million in debt was charged off (unrecovered) by lenders. For the past 40 years, acquiring debt has become a fad, even considered a good idea at one point. Unfortunately, the mistakes of the past continue to haunt consumers today.
Practical Debt Management Tips
Ignoring your excessive debt is a bad idea. Most lenders and creditors would rather work with you on an adjusted payment schedule than have the expense of sending your account to collections, or worse, repossessing your property. There are several options available to those with too much debt. InsideBadCredit.com encourages you to explore each of these options and find the right program for you:
- Better Budgeting: Working on a practical budget that allows you to pay your debts and still live within your means can save your credit. The web is full of budget management tools to help you accomplish this.
- Debt Consolidation Loans: While this is a viable solution for some, be wary of hidden fees, high interest rates, or low minimum payments that don't cover principal balances. Shop around for the best rates and read ALL of the fine print.
- Credit Counseling Companies: Watch out for these – many are scam artists.
- Filing Bankruptcy: While many feel this is the only option for dealing with too much debt, a bankruptcy can stay on your credit report for up to 10 years. This can have devastating consequences to your everyday life. (Learn More About The Effects of Bad Credit). Carefully consider the alternative options above.
Chances are that if you're reading this now, you already have some credit problems as a result of too much debt. The good news is that there are some options open to help you. Read our series of articles on Fixing Bad Credit.
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