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Five Bad Habits That Can Lead To Bad Credit

Oct 19, 2007
There's lots of good ideas out there on what you can do to correct a bad credit or a bad debt situation. But have you ever taken a few minutes to think, "How in the heck did my credit get so bad?".

Bad credit does not come about because it's something that you thought about and planned for. It's more like the opposite. It comes about because you're enjoying your life, spending on what you want, not always just what you need.

Let's face it. Credit is a great thing to have. Credit takes your life to a whole new level. Just try to book that hotel room in Las Vegas without a credit card! Most hotels wont even take cash because they want to bill you for that last meal or whatever after you've checked out.

But here are some ways to that you can ruin a good thing:

1. Never pay your bills on time.
2. Use credit cards for all purchases, large and small.
3. Borrow against the equity in your home.
4. Buy the most expensive car or home that you can afford.
5. Amass substantial student loan debts.

Now lets talk about this list for a minute. Are you always waiting until the last minute to pay your bills? If so, you're cruising for a bruising. You should wait no more than a few days after you receive your bills to pay them.

Next, do you use credit cards for both large and small purchases? Everytime you pull up to the drive-thru at Wendy's and McDonalds do you whip out that credit card? If so, you may be paying less and less attention to your credit card statement. Maybe you don't notice the $5 charges. If you eat 3 meals a day that's $450 per month or $5,400 per year that you didn't even notice.

Do you want to upgrade that kitchen. Even if you decided not to upgrade the countertops, the cabinets or the floor, you would be looking at about 5 large for just appliances. Why not borrow against the equity in your home? Here's the problem. The real estate market is always in flux. There is absolutely no way to tell what your house will sell for, until it's already sold. Brokers require thousands in commission fees to sell your home. You could very easily end up taking a loss. Take too many losses and you're in serious debt.

Buying cars, and homes are really about status. We want to feel good about ourselves and so we dress nice, buy expensive cars and homes. It's much better to live below your means than above it. There are a lot of people abandoning nice homes because they finally figured out that they can't afford it. People who drive luxury cars declare bankruptcy every day of the week.

As far as student loans go, I must add myself to the list of blind borrowers. When in college you think it's going to be easy to pay those loans off. Well its not. Thank goodness the federal government now allows borrowers to use a "graduated payment plan." Also, if you are still taking classes or can prove that you are unemployed, you can file for a "forbearance" and skip a few payments. Instead of borrowing, should try to apply for scholarships at the school you want to attend. There are also local civics clubs who provide scholarships. You can also try at the state level. Apply first, borrow if you must.
About the Author
Preston Hill is an extensive researcher of financial and money management products and ideas. If you are interested in finding out how to better manage your money and reduce your debt, visit http://www.easyinfo123.com/debtfree.html
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