You have to learn how to monitor credit thoroughly if you want to manage your debts well. There’s no doubt that debt can bring a lot of benefits to your financial life. But you have to learn how to manage it well. The best way to do that is to monitor how you use debt.
The truth is, the way we use credit is tied to how we spend our money. So if you want to understand your credit behavior, you have to look at how you spend. You might think that the current events can make it harder to avoid the use of debt. But the truth is, it may be producing more benefits than you thought.
According to reports, the coronavirus pandemic is helping Americans develop better financial habits. To be specific ⅔ said that the pandemic forced them to find ways to lower their spending. The money that was used for entertainment expenses and eating out is now being used for something more necessary like food and groceries. This is a perfect time to develop new skills because as it turns out, people need to cut back on spending since the recession already started.
The less you spend, the fewer chances there are of using credit. But even if it comes to a point wherein you have to use credit, that’s okay. You just have to monitor credit thoroughly so you are sure that you will not borrow more than what you can afford to pay.
3 tools that will help you monitor credit
But how can you monitor your debt use thoroughly? It’s not a difficult task to accomplish. And there are three tools that you can use to make the task easier.
If it’s related to your finances, you need a budget plan. This is the first financial tool that you need to learn how to create and use. It doesn’t matter what your financial situation is like. Whether you are young and starting to earn or if you are already well-established in your career, you will always need a budget plan. It can help you survive any financial crisis that may come your way.
The question is, how can this help you monitor credit? It can help you control your credit use. The budget plan sets the limit on how much you can spend on credit.
When you have a budget plan, you can set an amount that’s dedicated to credit use. For instance, you can create a $500 monthly budget for your credit card. When you get your salary, you will put aside the $500 so you can use it to pay off your balance in full when the billing statement arrives.
Debt relief program
The second tool that you can use to help monitor credit thoroughly is a debt relief program. There are different ways to get debt help. You have debt consolidation, debt management, debt settlement, etc. While these are all effective, there is usually a program that is specific to your financial situation. It’s important for you to find the right program because it will make your monthly payments more affordable.
The purpose of the debt relief program is to make sure you meet your monthly obligations. It ensures that you will pay off any debt that you owe. Best of all, it will help make the process more organized, affordable, and attainable. The clear cut process provided by the debt relief program that you will choose will make debt freedom more likely to happen.
The last tool that you need to monitor credit is your credit report. This is a report that you don’t have to generate yourself. You can get a free copy of this report from the three major credit bureaus, Experian, TransUnion, and Equifax. You just have to download it using the Annual Credit Report website. The law mandates each of the major credit bureaus to provide everyone one free copy of their report each year. That means you get 3 reports each year.
Use this credit report to monitor your credit transactions. This report is a compilation of records from the different creditors and lenders that you borrowed from. You need to monitor this because it will help you check if your records are correct. It will also help you spot any unauthorized credit accounts. This usually happens when you are a victim of identity theft.
If you spot these errors or unauthorized credit accounts, report it immediately. It can affect your credit score and could make you pay for a debt that you did not borrow.
Why credit monitoring is important
Some of you may be thinking that you don’t need to monitor credit because you are careful with what you borrow anyway. While that help protect your finances, it will not be enough.
There are two specific reasons why you need to be serious about credit monitoring.
For tracking your use of credit
First of all, it keeps you aware of your current credit situation. If you want to keep debt from destroying your financial future, you have to make sure that you can stay on top of what you are borrowing. It’s crucial for you to track your use of credit because it will help determine if you’ve gone overboard already. If you’ve borrowed too much, you can pull back and make plans to pay it off aggressively. It will keep you from landing in a huge debt mess because you failed to see that you already have a high balance.
For catching unauthorized credit use
According to a report, identity fraud cost us $42 billion in damages. Companies have been struggling to secure themselves from these cybercriminals. But unfortunately, some of them are still successful in taking information that can use for crimes.
Since the data breaches in companies are beyond your control, you need to make sure that you do your own monitoring. This is why you need to look at your credit report every now and then. Doing so will help you spot these unauthorized credit accounts that were opened under your name. If it was not you, report it immediately so it can be investigated. That way, you will not be left with an unauthorized debt that you have to pay off.