Bad Credit Is Coming! – Signs Approaching Bad Credit
Bad Credit Is Coming! – Signs That You Are Approaching Bad Credit
Many people in the United States today have bad credit and the numbers have continued to rise and it isn’t just those who are lazy who end up with bad credit. Many hard-working people like you who are well-meaning end up in situations where their credit is ruined. The best way to avoid this is to look at the different warning signs that can indicate that you’re headed towards a situation where your credit can be destroyed.
Medical Bills
If you don’t have medical insurance, this is one sign that you’re headed towards financial trouble. Statistics show that a large percentage of people who end up with bad credit are those who have outstanding medical bills. As the cost of healthcare continues to increase, getting sick or hurt could put you in debt that is difficult to get out of. If you don’t have health insurance, it may be time for you to get it and if you are maxing out your credit cards, this is another sign you are headed towards bad credit.
Credit Cards
Credit cards are a key factor that causes many people to end up with bad credit due to the ignorance of not knowing or lack of financial discipline. Their high-interest rates combined with late payment fees and universal defaults can make them a nightmare for people who don’t use them properly. It is best to keep your credit card balances as low as possible and only use your credit card when you absolutely need it. Many people also make the mistake of using the equity in their homes to pay for expenses.
Home Equity
While using the equity in your home can be a good idea for those who want to remodel their kitchen or bathroom, they should be used cautiously. Before you use the equity in your home, make sure you will be able to make the monthly payments with ease. You want to avoid situations where you could default on your payments. Living paycheck to paycheck or not having adequate savings is another sign that you could end up with bad credit. It has been shown that about 40% of American families have less than $1,000 saved up. Every situation is different and though you may not have $ 1,000.00 in the bank try to have something set aside.
Emergency Funds
If you get into an emergency, you will have little money to protect you and this can leave you open to using a credit card or payday loan. This will get you into a cycle of debt that is difficult to escape from especially using a payday advance. I worked at a payday loan store and I have used them and it is a hard cycle to break because it becomes a part of your income and if you don’t use them responsibly chances are you will get behind on your payments
It is important to start saving money and get rid of the bills that you don’t need. Saving money is an important part of building wealth and if you’re living paycheck to paycheck, you’re not getting ahead financially, even if you make a large income and if you are only paying the minimum balance on your credit cards, it will be difficult to pay them off in a timely manner.
Cosigners
Another thing that can lead to bad credit is co-signing on a loan for someone else. Even if you have good credit, the person that you’re co-signing with may not. If they decide to stop making payments on the loan, you will be held responsible because you signed for the loan as well, so it is best to avoid co-signing for a loan at all times.
