Nearly everyone in the US has a credit card and relies on a good credit score to be able to live a financially healthy life. With this in mind, many people believe that they’re better off financially because they stay totally debt free, and don’t have any obligations on their cards. While having debt may seem like a negative, using your cards (as long as you pay them every month) to buy things is considered to be good debt. Debt stops being good when you start missing payments.
Unfortunately, missing just a few payments can send anyone into a downward spiral. The average household is five figures in credit debt. A good majority of people will automatically assume that filing bankruptcy is their only option, just because their bills have fallen behind. However, there are a few ways to get rid of your bad debts and fix your credit without ever having to file for bankruptcy.
What is Bad Debt?
To understand what lousy debt is, you should also know what bills are favorable. Good debt is when an individual uses their credit cards to make large purchases and pay them back, thus building an excellent score. Things like student loans, business loans, and even car loans, are considered to be proper dues. Those are productive deficits that contribute to your wealth and development.
Going from having acceptable credit to bad credit is also that easy. Many of the same things that help people build up their ratings are also things that are difficult to pay off and may drive someone further into debt. It may not be easy to pay off capital monthly, but this is the only way to stay under the realm of “good debt.”
How to Prevent Poor Credit
The best way to keep your finances in check is to prevent yourself from missing payments. If you’re paying off your debts monthly, it will keep your creditors happy. On the other hand, paying late, even once, cannot only affect your credit score but also result in a higher APR.
Try these tips to prevent missing payments:
- Set Reminders: If you know you’re forgetful, either put your loans and cards on autopay or make sure to create several alarms that will let you know when you have to pay so that you don’t end up lowering your rating.
- Talk to Creditors: Sometimes, financial hardships happen. Jobs are lost, unexpected bills come up, etc. Any individual who is having trouble paying should try calling their credit company first. Chances are, they will want to work with you. They may give you an extension or put you on a monthly payment plan. Every company is different, but some companies will raise your interest in exchange for these benefits, but at least your credit score will remain average.
- Pick up on Collectors: If the balance is high and you refuse to pay for more than six months, the original issuer can sell the account to a debt buyer, who will try to contact you and get you to pay off your balance. It’s tempting to ignore those phone calls, but it’s likely they’re calling to make a deal. Often, they’ll lower the amount you owe by several hundred dollars, allowing you to pay off your tally and start rebuilding credit.
The worst thing you can do is ignore bills. If you’re serious about getting your finances back on track, contact Heather Benveniste with Benveniste Law Offices. She is a seasoned Illinois debt settlement attorney who understands how stressful it can be living with an overwhelming amount of debt. Having spent seven years as a debt collection attorney, she’s aware of the tactics used to get debtors to pay up. She can use her inside knowledge to engage in negotiation and exploit loopholes to your benefit. Contact us today at 1-800-497-5358 for a free case evaluation.