Top 3 Reasons Your Credit Score Bottomed Out
Friday, December 5th, 2008
No one wants to admit bad credit but everyone should be willing to do something about it. Your financial situation and your credit score go hand in hand so it is important to keep working on repairing your credit history and stay consistent in getting your personal finances straightened out and on the road to a more stable position.
There are many reasons we fall behind on our bills, making our credit score plummet. Having a clear understanding of why we can’t seem to dig our way out of debt is not always easy but there are some common reasons why we can not seem to find our way back on a good financial track.
Here are three of the top reasons why we struggle to maintain good credit and what we can do to reverse it.
1. You Don’t Have Money
Sometimes we let our expenses overtake our income. This makes it all the more difficult to stay on task, pay your bills on time, and make good, solid financial decisions. It may be overwhelming to constantly see your expenses amount to more than what you are making but the best advice is to not give up, no matter how desperate the situation may seem. You have to take it seriously and do what is necessary to find more money to use to pay down/ pay off your debts. You can not simply ignore creditors and collection agencies unless you want to make the situation all the more difficult to get out from under. Take a second part time job and commit to devoting your second paycheck to your debts. It will not be forever but it will take some time. You can also get on the phone with your creditors and negotiate payment arrangements based on your financial hardships. They may not make it a walk in the park for you but making an effort to pay off your debts will let them know you are trying.
2. You Have The Wrong Kind of Debt
Believe it or not, there is a difference in debt. The good debt versus the bad debt may be the reason you can’t keep your head above the water. Good debts are ones that work for you, such as your mortgage that puts equity into your home. Bad debt is purchasing luxury items on credit that you can not in reality afford. It is the bad debt that keeps you scraping by from paycheck to paycheck and having too much of it will keep you in the hole. As in the no money example above, you might consider acquiring a second form of income to pay down the bad debts. Avoid getting into any more bad debt while you work to pay off the bills you already have. Don’t apply for new credit cards or make purchases you can not afford. After you have been able to reduce your expenses, you can start saving your money towards those big ticket purchases of your heart’s desire.
3. You Don’t Track/Control Your Spending
If you have not been responsible in using your credit card and have been known to overspend, you will never get ahead until you know how much money you have to spend and where your money is going. It may seem a bother to have to write down every single expenditure but it’s about being accountable for your spending. If you know you are an overspending, it is time to get serious about a budget. Once you have tracked what you spent, sit down with those numbers and see where you can save some money. Create a budget based on your income and plan to prioritize paying down your debts and starting a savings plan.
