One of the most useful tools to help you find your way is a map. Writing down your monthly income and comparing it to what you spend each month is great map to gaining control of your finances. You can fill out the automated calculator or download our worksheet. Either way, most people find that they feel more in control once they complete this exercise.
Importance of Good Credit
People start their financial lives with the best of intentions. As life goes on, most of us find unexpected bumps in the road — a car repair, a new roof, an unexpected injury or the loss of a job. In spite of what happens, you must never forget that your credit rating is what makes many things in life possible. As hard as it may seem, you must retain good credit standing. Do not underestimate the value of good credit. The unfortunate reality is that the people with the best credit pay the least interest on loans and credit cards, and they have much greater borrowing power.
Improve Your Credit
The best time to establish good credit is when you have no credit. Before you sign up for your first credit card or loan, make a promise to yourself that will do the following:
- If you have no established credit history, open a low-cost checking or saving account and make regular deposits. Use credit cards carefully and pay them off each month.
- Keep a minimal number of credit cards.
- Keep credit card balances low, under 50 percent of your credit limit per card.
- Do not apply for a new credit card because you are at the maximum limit on the old one(s).
- Pay your bills on time.
- Make at least the minimum required payment and pay down the balance when you can.
- Know your debt to income ratio and keep it to 20 percent or less of your take-home pay.
If you have a credit score that you wish to improve, it may take some time, but it will go up if you do the following:
- Have a budget and stick to it.
- Reduce or eliminate unnecessary installment payments like cable and new cars that may keep you from living off of your take-home pay.
- Make minimum payments on time.
- Understand that bankruptcy and foreclosure will stay on your credit record for up to seven to 10 years.
- Get help from a reputable, free, credit counselor.
- Fix errors on your credit report.
For a free look at your credit score, go to www.annualcreditreport.com.
Prioritize Your Debt
Prioritize your spending based on need. You must have shelter, food and utilities. However, the second car payment or boat payment could be eliminated or downsized. Look for bills that can be reduced or eliminated such as the cable bill, cell phone bill or dining out. A certified nonprofit credit counselor will, for no charge, help you determine a budget. Never give an agency a large up-front fee or donation, or join an organization with a membership fee. There are plenty of reputable free counseling agencies around to help you.
For consumer debt advice, visit the National Foundation for Credit Counseling at: www.nfcc.org.