Credit cards can become a financial drug. The more you use them, the more you are addicted to to using them, and use them more.
Unfortunately, the more you use your credit cards, the lower your credit score will be. 35% of your credit score is based on how much AVAILABLE credit you have. If you have maxed out your credit cards, then you probably are facing credit problems and may even already have what is considered bad credit.
A New Generation Of Bad Credit Borrowers
Over the past few years, a growing number of young people have become victims of excessive credit card debt.
Knowing that teens, new to managing their own finances and eager to be adults. Credit card companies had been targeting them with credit card offers as soon as they turned 18 and went to college. However, thanks to the Credit Card Law for 2009. Companies are now prohibited from issuing credit cards to young people under 21 years old without consent from their parents or guardians.
Even more financially experienced adults are not exempt from accumulating excessive credit card debt.
Most people file bankruptcy due to out of control credit card debt. If you find that you are only able to make the minimum payments on your credit cards, then you are in for a rough time! You need to take control of your spending.
Looking over your recent credit card statements will give you a good idea of where your money is going. Are you eating out too much? Maybe your weekend spending is out of control. Whatever it is, you need to create a budget. If you create a budget and your income just doesn’t meet your financial obligations. You need to seek out the help of a debt consolidation company or debt negotiation service. Recovering from debt may not be easy but, you can do it! All you need to do is create a budget and stick to it!
Listed below are some friendly reminders to avoid bad credit:
Keep track of your purchases.
Review your credit card statements at least monthly. Some of our clients will review them weekly to make sure they haven’t accidentally done any impulse shopping and forgot about it. Keep in mind little things add up quickly. Do you buy snacks at your office vending machine. Write down everything you spend in a week and I bet you will be surprised! Cut out the non-essentials until your debt load is lighter and you have some breathing room. It may mean cutting back on a lot of your “fun” activities for a few months or even a year or 2. But it will be worth it if you can avoid filing for bankruptcy!
Pay your bills on time.
Paying bills promptly will lead to having a good credit history. One of my clients will set everything up for the minimum payment only thru her automatic bill pay offered by her bank. Then she manually sends additional funds as she has it.
Always pay off the credit card with the highest interest first. Then put it away and STOP USING IT! As your credit improves you will qualify for lower interest credit cards.
If you have enough money, then the best practice is to pay off your credit cards in full every month.
Balance Transfers
Some clients have basically designated one credit card as the one they will use in their day to day lives. They put away or even cut up the other cards and just concentrate on paying he balances off. If you can, look at your credit card w/ the best INTEREST RATE, not the highest credit limit. Call up that bank and see if
- They would be willing to increase your credit limit
- If they have any good balance transfer promotions
If they do, start negotiating. See how much they can increase your credit limit to. Make sure you tell them if you are making more money or have new streams of income (such as a 2nd job, spousal support, child support etc.) coming in that will help them make the decision that increasing your limit isn’t as risky as they may have though.
Move all high interest cards onto the lower interest one. Keep in mind that balance transfer options don’t last forever. Some are for only 3 months, then the rate goes up. Negotiate that too. If they don’t budge, look at your other cards and be ready to move the balance again once the promotion has ended.
Avoid cash advances.
At all cost, avoid credit card cash advances. Cash advances carry higher interest rates than purchases. They can be so high that its like taking out a payday loan.
Here is another tip. Even if you’re married, have your own credit card and your spouse should have his or her card. That way, if the marriage goes sour, he or she won’t be running up charges on a joint credit card. This happened to me in my first marriage. My wife ran up our joint credit card to the $15K limit. I learned the hard way. I have my own card now and my second wife has hers. And we track our spending too. Great tips.