Bad credit is generally not as simple as missing a payment. It is usually something that builds over time and can be stopped in advance. The key is to know the early warning signs of credit problems and to act on them before they mushroom into something bigger. When you notice any of the following early warning signs, consider speaking with a credit counselor or freezing your spending until things are under control.
Five Early Warning Signs of Credit Problems
You Begin Paying Off One Credit Card with Another
This is something that gets more common every single day. When you have a credit card that is charging interest at one rate and you are offered a card with a lower one, the instinct is to get the new one and pay off the old one. While this can be effective in a few situations, it usually flops. Why? Well many people have a freshly paid off credit card with debt problems and accrue even more debt by using the old card again. Others don’t look at the terms closely and miss fees and other costs that render the interest rate null over time. Generally speaking this is a bad move for most people.
You Begin Using Cash Advance Options
When you use your credit card for cash advances, you are borrowing money under pretty much the worst possible terms. (except perhaps your father in law) It is a sign of desperation financially and it is probably a pretty good sign that you need to slow down your spending on credit for sure.
Your Credit Cards Are Constantly at the Limits
When you head to the store and swipe your card, do you get butterflies in your stomach until you see that digital “approved” sign come up? If so, you are probably either facing bad credit issues or on your way there. Your limits are not meant to be pushed with credit cards and constantly being there is certainly a warning sign you should not ignore.
You Fall Behind on Your Most Important Payments
Mortgages, car payments and various other things that you certainly can’t afford to miss payments on should be paid in advance. When you start having to pay them late that is a bad sign for your finances. Spend some time with a credit counselor or professional budget maker to get things in order. Whatever you do, don’t stay on that track for very long. It can ruin your financial profile quickly.
You Start To Lose Track of Your Debt
This is perhaps the worst of them all and it is shocking how many families are in this position. When you get to the point where you are unsure of what you owe each creditor, you are in serious need of a reset button on the budget. Always keep good records and make sure you always follow through on payments when you can. If you miss one, contact them at a minimum and make sure you budget the money into your coming payments.
Bad credit is not really a mystery. It can happen to the best of us. The truth is, these are strong warning signs of bad credit that can change your future if you stay aware of them. When you recognize them take action!
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