Spotting Credit Trouble

It’s not uncommon for people to have difficulty handling credit, especially when they’re just starting out. The best insurance against having this happen to you is to establish a realistic monthly budget and stick to it. Your payment cards should fit comfortably into this budget and can actually make tracking your budget simpler.

1. warning signs - find the easy clues
2. before you dial 911 - call these people first
3. in control - take charge of your charges
4. credit quiz

1. Know the warning signs
   If you find yourself working overtime or an extra job to keep up with your expenses or payments, YOU MAY BE IN DEEPER THAN YOU SHOULD BE. You also shouldn’t have to use money from savings to pay for living expenses, except in an emergency.
   If you need to borrow money to pay off another debt or loan (or if you need to get a new credit card to pay off an old one), it’s time to develop a new plan. The same advice applies if you have reached your credit limit on your account. Late payments, calls or letters from credit agencies, denied or revoked credit—these are all signs that your good credit history may be in jeopardy.
    
   What to do if you spot trouble
   Start by drastically reducing your card usage. If necessary, leave your card at home or place it in a different area of your wallet as a reminder.
   If you haven’t done so already, SET A REALISTIC BUDGET WITH ACCOUNT PAYMENTS AS A TOP PRIORITY. Make at least the minimum payment every month. Set a specific timetable for paying off your debt.
   Don’t panic. If you cannot make certain payments on time, contact your creditors immediately. They’ll want to work with you, and together you should be able to figure out a realistic payment schedule.
   Keep in mind that a bad credit rating can have serious negative consequences down the road. It benefits you to try to find solutions to any potential credit problems.
    
2. Ask for assistance
   The National Foundation for Consumer Credit (NFCC) is a nonprofit organization providing INFORMATION ON FINANCIAL AND CONSUMER TOPICS. They can refer you to one of more than 700 local Consumer Credit Counseling Service (CCCS) offices. Call the NFCC directly at (301) 589-5600, or for an NFCC referral to the CCCS, call 1-800-388-2227. Your CCCS office may also be listed in thecommunity services section of the local phone directory.
   General information on consumer credit is available in published form by calling the Federal Trade Commission at (202) 326-2222. For answers to specific questions about credit, contact the National Consumers League at (202) 835-3323.
   Finally, be wary of any private services that claim they can “erase” a bad credit history, usually for a large fee. Changing an accurate credit history is legally impossible. Instead, work with a budget and your creditors to reclaim a credit history you’ll be proud to call your own.
    
3. Don't forget you are in charge
   First, BE CAREFUL ABOUT CHARGING LARGE IMPULSE PURCHASES ON YOUR ACCOUNT. If it’s a great price today, it’ll still be a good deal tomorrow, after you’ve had time to think it over. Finance charges on a large purchase can far outweigh that special discount.
   Second, avoid taking a cash advance to cover your normal daily expenses. (Paying for a group’s meal on your card while pocketing the cash can be a variation on this theme.) If you can’t cover your regular expenses this month, you probably won’t be able to do so next month either.
   Third, always keep a ballpark figure of your current charges in your head (or on a piece of paper in your wallet). A few weeks of unmonitored spending can follow you for months. You should never be surprised when your statement arrives.
    
4. Take this credit quiz
   Feel like you’ve got your credit and finances under control? To find out, take this little True/False quiz.
   
   1. You start the week with money in your pocket, end the week with none at all—and have no idea where it went. T F
       
   2. You’ve paid one credit card bill with a cash advance from another card. T F
       
   3. Your budget has these categories: fast food, movies, CDs, and “all that other stuff.” T F
       
   4. You often buy on the spur of the moment, because “hey, it’s only money.” T F
       
   5. You figure that using your card to pay for everyone’s pizza and pocketing the cash is a great way to look good and avoid going to the ATM. T F
       
      Answer True to any of these questions? If so, you should take a peek inside and do a little extra reading.