- Identity theft is a real issue, so take action now to avoid it.
- Always avoid taking out payday loans.
- Check your credit report often. If necessary, consider using some credit repair services to correct mistakes on your report.
- Stick to your budget, spend wisely, and borrow strategically to avoid problems that lead to bankruptcy.
As you're working so hard to build credit, you'll want to mitigate risks and avoid making mistakes that will take years to erase from your credit score. Here are some things to watch out for:
Identity theft is the criminal practice of someone using your information for personal gain, usually monetarily. According to the Bank of America, often times thieves use your information to apply for loans and credit lines, file for tax returns, spend your money, apply for jobs, and forge checks. There are myriad ways identity thieves can access your information, so it's best to stay informed and protect your personal information as much as you can. Visit our Identity Theft article to find specific ways you can prevent these problems. Click here to learn about specific ways identity theft can affect you, and click here to learn about criminal identity theft and how to prevent it.
Pay Day Loans
Payday loans: just say "no!" This is a seemingly easy, fast way to get cash when you have bad credit. However, you can easily lose more money by taking out one of these "bad boys" than what you originally borrowed. It works by you showing the lender that you have both income and a bank account, and they lend a small amount of money to you at a high interest rate. You agree to pay the amount back in full by your pay day, or the loan's interest rate skyrockets and you start losing money instantly. Many payday loans require access to your bank account as well and will withdraw the money from your account without your approval. This can lead to overdraft charges to you, and a payday loan will almost certainly damage your credit score (which will take years and years of careful planning to repair). Payday loans are so risky and harmful that many states have banned them already. Please just avoid these loans!
If you find yourself in situation where you need financial help or have already borrowed from a payday loan creditor, please contact us and we'll help you in any way we can.
Credit Repair Services
Occasionally, you'll hear that your credit score from a certain credit bureau is lower than it should be. Upon seeing the details of your credit report, you should make sure all the information presented is fair and accurate. Check that there aren't multiple reports for one debt, incorrect reporting by a creditor or debt collection agency, etc. In other words, make sure that what you're paying or have paid for every debt you've had or currently had is completely accurate. In the unfortunate circumstance that there is missing or incorrect information, then it might be a good idea for you to dispute the incorrect item(s) on your credit score. You can do this by contacting the credit bureau yourself or hiring a credit repair service to do it for you. Each has its setbacks and advantages, so do plenty of research before deciding which one is right for you.
Declaring bankruptcy basically means you ask the federal courts to dismiss your debts, so it might seem like an "easy out" from most of your debts, especially any credit card debts you may have. However, bankruptcy is anything but an easy process. To put it in perspective, declaring bankruptcy will:
- Cost you court fees and (often) attorney costs.
- Completely ruin your credit score for at least a decade.
- NOT free you of mortgages, car loans, or student loans; in fact, you could lose your property.
- Close all of your credit cards; it will be at least a year before you find another lender.
- Ensure that you can only borrow from creditors who charge exorbitant interest rates.
- Prevent you from taking out future car loans or purchasing a home later on.
It is far better to prevent the problems that lead to bankruptcy than to fix them. Here are some basic steps you can take now to avoid such a situation:
- Budget wisely, and create a spending plan based on your budget.
- Before you even get into debt, make sure you're following these borrowing principles.
- Once you acquire debt, make sure you manage it wisely.
- Create and stick with a debt repayment plan.
- Always set and re-evaluate your financial goals.
If you find yourself in a situation where you feel like you can no longer manage your debt or repay it in time, please contact us and/ or consult a trusted financial professional ASAP.