Every month the regular bills plus the credit card debts become too much burden for anyone’s budget. When this starts happening, some bills are left unpaid and some bills get paid late.
Non-payment and late payment both cause damage to your credit. Sometimes this damage becomes so big that the debtor feels that they can never get out of debt and be able to get credit for any important purchase.
The good news is that getting out of debt and repairing your credit to a stage before the credit problems started IS possible. It will definitely take time and effort. But with the right and consistent actions, it is totally possible.
To get loans approved, you need a good credit score. It’s a number that tells whether you’re eligible to get credit or not, what interest rate you can get, and what amount of money, banks and other lenders will agree to give you. An average credit score of 750 is good, but bigger the score, the more credit you can get at better terms.
It is always best to avoid credit. But buying a home or a car becomes very easy with the credit facility. Credit enables us to afford what we cannot buy otherwise. Henceforth it is so tempting to always use credit without thinking of the interest, usually the interest sounds low and grabs our attention immediately, it is only later that we realize into the pit we have fallen.
The problem starts when people start using their credit cards for buying everyday stuff like clothing and groceries. Before the debtor realizes it, the credit bills keep getting bigger. They start just paying the minimum amount and the debts become so big it seems like it cannot be paid off in eternity. Also, many people keep using their credit cards even when they know their unpaid balance is too much.
The credit scores define the financial standing of a person. Everyone wants to have a high credit score. Even if your credit is bad right now, there are ways to raise it. Let us first understand what it is that lenders see in a person’s financial standing to determine whether to give them credit or not.
The justification that self-control is so important when it comes to financing is not a philosophical or a theological thing: it's a practical thing. Interest rates for a credit card are high, making your transactions more costly. When, in the first place, you do not have the money to pay cash for something, you certainly do not want to make it more expensive by adding interest to the amount.
Most people waste more money buying unneeded or excessively expensive things as they pay with credit rather than cash. You can find yourself hopelessly in debt if you go on multiple spending runs without a plan to pay them off, or if your plan goes awry and you lose your job or get hit with any kind of medical bills. Declaring bankruptcy will mark your credit history for up to 10 years and you'll have to build good credibility all over again when the documentation finally goes out.
When credit card balances go unpaid, your credit score may continue to drop, and your insurance bill can result in an unwanted rate increase. Which will hurt you a lot in the long run. Insurance companies who review credit scores before estimating premiums may presume that if you are unable to pay your bills, you may be able to let your vehicle or home maintenance slide, or you may be an irresponsible person, rendering you a greater danger.
Budgeting is a great instrument for many people to keep spending under control. It's easy to forget how you can add up during the month of paying a cup of coffee here and a new book there and get you in trouble. You may not even realize it at first. The answer is to schedule the expenses, then write down everything. Budgeting can be as simple as making a list showing how much money you earn in a month, followed by actual running costs. The gap which remains will tell you how much you can invest.