Stringing a Credit Safety Net: Part One

A credit card can be a very useful tool. In fact, credit cards are becoming necessary for Americans who need or will need to make big purchases. Anyone who will need to buy a house or car or business equipment or anything else major will need to build credit.

Bad Habits

But there are lots of dangers to credit cards. Without proper monitoring and good spending habits, debt can pile up very quickly. When entering the world of credit, one must do their homework and become aware of the dangers they face. In a three article series, you will learn some great ways to keep your credit from derailing your life.

Your Credit Report

1. Check your credit report: Many people believe that checking their credit report is of little use. Many feel that since they are powerless to change the report, why waste the time looking at it or why waste the money paying for it? First of all, you are not powerless to change it. Yes, your history is there and cannot be changed. But your history is not the only part of your credit report. There is also a future. The decisions you make now affect the future of your credit report and can balance out or even outweigh past credit decisions. You may have been irresponsible in the past, but you can become responsible now and begin to rebuild. Also, humans run credit-reporting bureaus, and as we all know, humans make mistakes. You may find in viewing your report that there are mistakes on it. If you can prove to the bureau that a mistake was made, it can be changed. In some cases, if the creditor cannot prove that you were late with your payment during the period they have reported to the credit bureau's that you were late with the payment, it may be removed from your credit history! You will also benefit from the knowledge of knowing where your credit stands. Viewing your report can shed light on areas of your credit you may not have been able to clearly see or understand. Viewing your credit report is like turning on a light in a dark room. If you want to get out of that room, you'll have a much easier time finding the exit if you can see what's around you.

Financial Hardships

2. Waiting for financial hardships to become financial problems: You've likely heard that adage "An ounce of preparation is worth a pound of cure." This is especially true of financial situations. If you look ahead in your life and see that there will be some financial hard times coming, it's a good idea to let your creditors know in advance. Oftentimes they will be willing to work with you on a payment plan. Some of them even have programs already in place to assist debtors in times of stress. Remember: they don't want to bankrupt you. They want to keep you as a customer for as long as possible to ensure that you continually spend money with them. Your credit cards should be tools in your hand. With some thoughtful usage you can keep them from overpowering you. In the next article we'll talk about budgeting and strategic bill paying.