What will you do if you have a lot of credit issues? If you can’t solve these issues, it’ll be hard for you to move forward and improve your finances. While debt has the ability to compromise your financial future, it can also help you strengthen it. You just have to make sure that you understand how to use it properly.
There are just some investments that you cannot pay for in cash. From your first home to your education and the capital you need for your business – all of these will be better off if you use credit to get them started. A house, business, and education will allow you to grow your personal net worth. So the earlier you start, the better it will be for you.
Don’t limit the possibilities that credit can open for just because you fear that it will destroy your financial future. As long as you can be a better credit user, you don’t have to fear that. You will know how to use credit to your advantage.
So how can you become better at handling your use of credit? One of the things that you need to think about is getting rid of credit issues. These may be compromising your ability to use debt to improve your finances.
Common credit issues that you can face
There are many credit issues that you need to be cautious of. However, there are three that will seriously keep you from using it to your advantage. Before you can hope to deal with these issues, you have to get to know what they are first. Understand what makes these issues dangerous and how to avoid them.
Thin credit history
Everyone starts with a thin credit history. The less you use credit, the thinner your history will be. Some people think that not using credit is good because it keeps them from wasting money paying off the interest of the debt. But what they don’t understand is that having a thin credit history will not put them in a better position. They will end up paying more in case they need to borrow. A thin credit history means you are a high-risk borrower. Lender and creditors will protect themselves by putting a high-interest rate on the debt that you want to borrow.
You might say that you won’t borrow money anyway. Well, you’ll never know what you’ll need in the future. You might be forced to use credit if a loved one gets sick and you are not prepared with enough emergency funds. Or once you decide to buy your own house, the best way to buy is really to use a mortgage. How will you take advantage of a low-interest rate if you won’t qualify for it because of your thin credit history?
Not to mention the fact that some landlords look at your credit history before they let you lease their property. There are other opportunities that you may not be able to take advantage of because of this credit issue.
Too much credit balance
This is probably the most common of all the credit issues that you will encounter. According to reports, more than 1 out of 3 American adults say that a large purchase is enough to max out their credit card. And do you know the amount that they classify as a large purchase? $100 or more. Granted this could mean any amount. But you have to realize that there are respondents of the survey who are not prepared for a $100 purchase. If this is true, one can only wonder, how much is their balance, to begin with? It must be close to the limit if it will only take $100 to max out their cards.
You have to be careful when you have accumulated a lot of debt – especially if this involves credit cards. These cards have a high-interest rate. The higher the balance, the higher the finance charges that will be added to your debt. So if you don’t do something to limit your credit balance, that can open a lot of problems that can destroy your finances.
Identity theft and fraud
The last of the credit issues that you should get to know is about identity theft and fraud. Reports reveal that identity fraud costs $16.9 billion in 2019. And it affected a lot of people through the data breach cases that happened to various companies.
But what happens to you if you become a victim of identity theft? Well, whoever got your data can use it to commit fraud. One of the common things done against you is opening a credit account in your name. They will take the money and leave you with the responsibility of paying it all off. If you don’t pay, it will ruin your credit history.
How to personally solve your credit issues
Now that you know the credit issues that you can encounter, how can you avoid it? Or if you already have that problem, how can you solve it?
Here are some of the things that can help.
If you have a thin credit history, the best way to solve that is to use more credit. But you have to use it responsibly. That means you have to make sure that whatever you borrow can be paid back before the due date.
The challenge is, how can you use credit if you don’t have one? This is a common dilemma among young adults or college students. You need a credit history to gain access to the credit accounts offered with the best terms. So what can you do?
Well, your options will be limited. But that doesn’t mean you cannot use credit. There are secured credit cards or retail/store cards that you can use to help build up your credit history. If you use these responsibly, you should be able to improve your credit history.
If you have a lot of debt, the most obvious way to solve that is to pay it all off. Choose a debt relief program that can be used to make your monthly payments easier. Even if you can’t afford to pay your debts, there is a debt solution that will help you pay it all off.
While you are paying off your debts, you have to be more careful about how you use credit. Make sure that you know how to use it properly. Credit can be dangerous but it can also open a lot of problems in the future. Understand how you can use it to benefit your financial future.
When it comes to the security of your finances, you have to be vigilant all the time. Your data is everywhere. The government alone holds a record of your personal information. Your employer has that information. Social media also has information that can be used against you. Does that mean you are doomed?
No, it just means you have to be careful when you are giving your information – especially in online stores. You should also make sure your passwords are updated. When you receive something from your email, be cautious of links that they ask you to click. These are the basic things that you need to be careful with so you will not be compromised.