The world we live in means we increasingly rely on credit to help with our day to day expenses. Unfortunately, living in such a way means you have to keep your eye on the ball or the cost of that credit can run away with you. Before you know it, you’re up to your neck in debt, and you can’t seem to find a way out. Your financial health is just as important as keeping your body in great condition. Fortunately, there are some habits worth learning that will make sure the wolf is kept a long way from your door. The following healthy habits will help you to take back control of your finances and ensure your credit is good.
- Make a Budget
What you need to do first to ensure great financial health is to create a budget. In your budget, you need to include your regular monthly expenses. This step will show you how much you’ve got available to spend and whether you can afford to borrow any money and make the repayments. There are plenty of resources online that will help you create one. The budget you create will also reduce your stress because it is helping you to take control of your life.
- Only Borrow What You Can Afford to Pay Back
A common mistake people make when taking out credit is to borrow more than they can realistically afford. It is one sure fire way to find yourself in a heap of financial trouble. There is a general rule of thumb worth following, and that’s to spend no more than one-third of your income on debt. By debt we mean credit cards, mortgages, car loans, student loans and lines of credit. If you stick to this rule, you’ll be showing companies that you can be relied upon to pay your debts back.
- Be Responsible with Your Credit Card Balances
Credit cards are useful to have, but they can become something you rely on and cost you a considerable amount of money in the end. They are great if you intend to pay off your outstanding balance every month. However, problems can occur when you let payments slide, and your balance creeps nearer and nearer to your limit.
Credit cards often come with a range of fees and charges you have to pay, so bear these in mind. There is often an annual fee charged once a year to your credit card account. Transferring balances from another credit card will also incur a charge. If you use your card to withdraw cash, there is a cash advance fee which is usually a percentage of the amount withdrawn. Purchases made in other currencies are charged a fee. Finally, there is the finance or interest charge when your credit card account has a balance.
- Keep an Eye on Your Credit Report
Your credit report is a summary of your credit history. It gives details of your name, address and Social Security number as well as information about the money you owe. It also lists whether you pay your bills on time or are late. Lenders will look at your credit report before lending you money. There are three major credit reporting companies Experian, Equifax, and TransUnion
According to US law, you can ask for a free credit report from each of these companies every year. You need to check it to ensure there are no errors. There could be incorrect personal information, loans that are still showing up as open even though you’ve paid them off or accounts you don’t recognize. Looking for this information will help to protect you from identity fraud and highlight other potential types of fraud. If you find something incorrect or inaccurate with your report, it is possible to get it changed. Read CreditRepair.com review (Updated for 2018), if you want to know more.
- Let Technology Work for You
There are a number of free tools offered by financial providers that can help you keep control of your credit accounts and manage your money better. Get in touch with them and ask about free transfers, low balance, payment due alerts, online bill payment options, toll-free customer service, and mobile banking. There is also plenty of free financial management software you can use to track your spending, create a budget and help you make financial decisions.
If you find yourself in financial trouble, don’t think you have to cope on your own. There are professionals who can help you sort out your finances and get back on track. American Consumer Credit Counselling (ACCC) provides free debt advice for consumers across the US. You can also find counseling options at a range of other organizations such as Credit Unions, Extension offices and religious organizations.