Handling Credit and Credit Score Problems

Credit has become an almost indispensable tool in our society.  Almost everyone uses some form of credit whether it is in the form of credit cards, car loans or mortgages.  Credit allows us to purchase goods and services by paying for them later which can be very convenient to buy big ticket items or stretch our monthly budget.  But credit can cause money problems if not managed wisely. 

Money problems are often the immediate result of too much debt with unmanageable monthly payments.  But money problems can also be compounded because of credit issues as result of unmanageable debt payments.  The debt payment burden can be enough to worry about and try to manage but future money problems are sure to come as a result of a declining credit score and deteriorating credit history. 

The first approach to help curtail future credit problems is to understand you have a credit and debt predicament.  As simple as this sounds, far too many consumers ignore the warning signs and don’t handle their credit problems in their infancy but rather wait until the burden of bad credit and delinquent payments devastate their lives and relationships. 

Some of the early warning signs of credit problems include:

You pay only the lowest amount due each month on your credit cards or other revolving credit lines.
You use your savings to pay bills.
You often get past due notices that include late fees.
You pay bills after the due date or skip payments.
You take out new loans or charge on credit cards to pay for basic living expenses.
You often use more debt to cover expenses or pay bills.
Collection agencies frequently call regarding past due obligations.
You are turned down for credit because of a poor credit history and low credit score.

The best advice to avoid the path of too much debt and a deteriorating credit report is to know in advance how much you can afford to commit to monthly credit payments.  Monthly credit payments should not consume more than 15% of an individual or family income excluding the housing payment.  Once debt payments pass this threshold, it is time to assess how severe your credit and debt issues have become and start a remedial course of action.

Before you approach monthly debt payments that are too hard to handle, credit should be limited to use for necessary purchases where the use of credit might have added attributes or for the purchase of assets.  For example, credit can be used for purchase with a credit card where the protection afforded by a credit card service can be valuable or credit could be used for the purchase of an asset like a home.  Credit for everyday consumption and shopping will always lay the ground work for future debt problems and credit score problems.

Once the debt amount and monthly payments grow out of control, getting out of that debt becomes harder and harder.  With a plan of action and some discipline almost any debt problem and credit score can be fixed.  The days of a debtor prison no longer exist.  A good budget with some curtailed spending is the number one tool to getting debt under control and starting a path of a good credit score.  But other options are available such as bankruptcy, debt consolidation loans and credit counseling. 

The goal should be to understand the problem including the amount of debt, your income and expense position and set up a plan that can work for you.  Begin by making a budget.  Determine what you owe and what your monthly expenses are.  This will help determine whether a good budget and a thrifty lifestyle can remedy the problem or more drastic action needs to be taken.

If the budget process is not enough, calculate out how much you can realistically afford to pay each creditor and approach the creditors to see if they will accept a lower amount or reduce the interest rate on the debts.

A debt consolidation may be another alternative.  Be careful not to obtain a debt consolidation that only places you in a worse financial position.  A debt consolidation loan used to pay off credit cards and other loans may be a possible solution but it may cost more in the long run.

The possibility of bankruptcy either with a Chapter 13 repayment plan or Chapter 7 should not be ignored when the debt levels are quite high.  This decision should not be taken lightly but the stigma of bankruptcy really no longer exists so this option should also not be ignored.

Credit counseling is another option to consider.  A good non profit credit counseling company can help work with your creditors to reduce the interest rates and possibly the amount owed and make a plan to get out of debt. 

The two important considerations are to avoid using debt for transactions they should not involve the extension of credit and once credit trouble starts, nip it in the bud early no matter what method is used.  No matter where you stand now, a good credit history and good credit score should be a goal to improve your lifestyle.

Repairing bad credit and a bad credit score is easier than most consumers believe.  Disputing inaccuracies frequently removes more than just the inaccuracy, which often leads to an improved credit score.  Secured credit cards and prepaid credit cards are quick and easy tools that can be used to rebuild credit.  Prepaid credit cards generally do not require a credit report check and the credit card payment history will be reported to the credit reporting agencies to build a history and improve your credit score.

Fixing a bad credit score and high debt payments may not be easy but it is easier than those confronted with this condition often believe.  Ignoring the problem will certainly not help; get debt help and credit score help now to start a path for a better lifestyle.