Recognizing Credit Trouble
Knowing When to Get Help
A big sign of credit trouble is when you can no longer pay your bills out of your regular income. If you are dipping into your savings account or looking for money elsewhere to pay off credit card bills or other debts, you're heading for trouble fast. If you think you're having trouble managing your debt, it's very important to acknowledge the problem early and to take immediate steps to fix it.
If your debt is more than 35 percent of your income, you had better take a closer look at what you're spending money on.
Debt and credit card trouble can sneak up on you gradually. You'll know you are in trouble when you can no longer pay off your debts at the end of the month with the money from your paycheck.
The rule of thumb is that your total debt at the end of the month should not be more than 36 percent of your monthly gross income.
If you're not sure whether you have a credit problem, consider if any of the following apply to you:
- Are you loosing sleep worrying about your debts?
- Are your debts making your home life unhappy?
- Are you draining your savings to pay debts?
- Are you charging more each month than you are making in payments?
- Are you making payments late?
- Are you paying only the minimum amount due on your credit cards each month because that’s all you can afford?
- Do you put off one creditor to pay another?
- Are you using credit to pay for basic expenses?
If you think any of the above applies to you, get some help. There are counselors who specialize in financial recovery.
Repairing the Credit Damage
If you realize you have a problem with your credit and debt, there are steps you can take on your own to fix it. The most important is to immediately stop incurring more debt!
When you stop piling up more and more debt, you can start working to get rid of what you already have. How?
> Take a close look at what you owe and to whom you owe it.
> Contact any creditors that your payments are overdue and let them know that you acknowledge your debt and will work in good faith to pay it off. Ask is you can work together to establish a plan that will allow you to pay off the debt in a manner that you can afford.
> Think about possible source of money. What, if anything can you sell? Should you get a short-term, part-time job?
It's better to face the problem early on and go about fixing it before it becomes too serious.
