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Credit Lessons and Long-term Effects
By Andrew Collier
Credit is supposed to help people in their financial difficulties, in moments where cash is short. But what happens now is that people are drowning in debt. It is not so much because they lost their jobs or met an accident that caused their inability to pay. It is rather because they borrow money more than they can afford to pay. As in the case of a credit card owner, he has the tendency to overspend. He finds comfort in the fact that by just swiping the card in the machine, he could buy the things he wants. He enjoys this freedom too much that he forgets he has bought too many items on credit more than what he could afford to repay. When the bill arrives, the realization that he has gone overboard hits him hard. Despite the financial distress caused by mismanaging credit, many people still have not learned their credit lessons.
You can get into trouble if you live beyond your means. This is not something that everyone finds easy because there is too much distraction. Every now and then, you see something beautiful and you want to buy it. A person with a big income has more money at his disposal, but this is not always the case. You can find wealthy individuals having problems with money. It is not about who takes home a higher pay, but it is more of who manages his finances well. Here are credit lessons that you can learn from and its long-term effects:
1. Managing your income involves paying your obligations promptly. Running away from your debt will not do any good to your credit score. Your credit score is a very important factor for lenders when deciding to grant you a loan. Pay your monthly dues in a timely manner not only to avoid penalties but also to build a good credit record.
2. When laid off from jobs or having trouble making the payment, make sure to give your bank a heads-up. This is one way of showing to the bank or lenders that you are interested in paying your debt; only that there are unavoidable circumstances that affect your ability to pay. However, you are willing to work with them for a possible option that suits your current situation.
3. If you have been delinquent in the past, try to make amends by paying off your outstanding account. You cannot get away from past lenders with whom you have unpaid balances as this will be reflected in your credit history. Your credit history is pulled up when you apply for a loan.
4. Do not borrow money more than you can afford to pay. If you have other debts from other lenders, ask yourself if you can still pay all obligations if you get another one. Make sure your income is enough to meet your monthly payment. Sometimes, it is wiser to get an extra job than to get a loan.
Many people do not learn their credit lessons until it is too late. Do not be one of the victims of mismanaged credit's long-term effects.
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