Importance Of Managing Your Credit

There is always a feeling of discomfort when one has to walk around with a purse or wallet full of money. In some instances it is unsafe but having a credit or debit card makes life a lot easier. A debit card is useful once there are funds in the account to balance against what is charged on the card. A chequebook can also be a useful thing but again there has to be money in the account on which the cheques are drawn to prevent them from ‘bouncing’.

Unfortunately, cheques are not accepted at a number of business places. This leaves us with the credit card. For some persons having a credit card connotes a particular lifestyle. It allows you the freedom to have what you desire within the limitations on the card (the amount that the card is valued at). It is also accepted at most business places and can be used for online transactions. However, the possibility of having money to use for your every whim can lead to bad credit for some if they are not careful with the card. Hence, credit cardholders need to be aware of their spending habits.

Being careless with a credit card can lead to a number of problems. A common cause of bad credit is ‘late payment’. This indicates to the credit card company that you were not able to pay your bills on time or that you forgot to pay your bill. It is important to always pay a portion of the money that you used from the card in the prescribed time for payments. If you pay your credit card bill late it stays on your account for years and tells the agency (from which you got the card) that you are a high-risk client. As a result your credit score will decrease making future loans cost you more. Your payment is late if it is thirty days, sixty days, ninety days and one hundred and twenty days after the due date for payment.

The solution to this problem is simply to pay your bill on time. Some persons have a high limit on their credit card, which allows them to be able to attach bills to the card. If you have bills (utilities, car payment and so on) attached to your credit card ensure that they are paid on time or remove them from the card. It is tempting to have the power to spend as much as you like but if you overcharge your card then you are liable to lose it.

Another factor that can lead to bad credit is that of inquiries. This happens when a company looks at your credit report for the possibility of giving you credit. This can be from a credit card company, utility company or mortgage company. The problem is that it usually takes thirty to sixty days for credit to show up on a report so even if you have been approved for credit cards a couple of weeks before it is not reflected on your report but the inquiries show it. As a result the company may refuse you the card for fear of you abusing it. This situation can be helped as inquiries fall off in six months to a year. The inquiries are done mainly to protect the company that is doing the inquiry from fraud.

Other causes of bad credit are charge-offs, repossession and foreclosure. Companies will do a chare-off if they realize that a customer has not paid a bill in a long time and does not intend to pay it. They write it off on the books as bad debt or a loss and this leaves a mark on your credit report for approximately seven years, which puts you in a delicate position for obtaining credit from other companies. If you are having problems paying your bills then it is suggested that you look into debt settlement or a Consolidation Company. Repossession involves the bank reclaiming a vehicle that was bought on a credit card that exceeds the amount of credit that was issued to the cardholder. This is the bank’s way of recouping money from the car. Other items can be repossessed as well such as appliances, machinery and so on. To avoid repossession the customer should try to avoid purchasing items that exceed the credit limit.

Have you ever witnessed a house being repossessed by the company from which it was purchased or the bank? This is called foreclosure. In this case persons are evicted from the home. This takes a longer while but when it does it is embarrassing to those involved. If you are not able to pay for the house selling it may not be a bad idea. This way you can avoid embarrassment and get somewhere that is affordable.

In conclusion, a credit can be a dream but if it is abused it could fast become a financial nightmare for the person who has it. If you know that you are unable to maintain the payments on a credit card because of your spending habits consider other options. Whatever you decide make it work for you.