Avoidance of Bad Credit

It's always advisable to avoid getting into a financial snag. Avoiding bad credit should be your number one priority. The most appropriate way of avoiding bad credit is to follow the proverb: "Cut your cloth according to your cloth." This means you should be satisfied with what you have. It doesn't mean that you should live like a miser but, at the same time, you should not buy things you cannot afford. It also implies that you should not borrow money that cannot be paid back.

Here are various ways of avoiding bad credit.

  • Prepare a family budget every month. Based on your income and expenses, ensure there is enough money to pay for monthly bills, household necessities, food, clothing, and miscellaneous items. Try to ensure that some money is set aside for emergencies. For example, if you think you may be laid off - experts advise that you set aside at least 6 months salary.
  • Cut out those things you neither need or can't afford. Sit down with family members and discuss the family budget together. This not only helps children understand the value of money, but engages them in discussing family expenses, giving them a sense of responsibility to assist you in saving money.
  • Many companies are now offering lay-away plans. They were very popular during our grandparents generation and, due to the gloomy economy, can help you purchase an expensive item without having to shell out the entire payment. Of course, if you really need the item, a lay-away plan is a prudent course of action.
  • If you find that you cannot meet monthly expenses, ask a family member for a loan to tide you over. If that is not feasible, check with your credit union to determine if a short term loan is available. They usually offer a lower interest rate.
  • Do not, under any circumstances, apply for a cash advance on your credit card. The interest alone will set you back. If you own a home, you may wish to talk to your lender about refinancing. But again, only do so if you can afford the monthly payments.
  • If you have credit card debt, call each company and try to reduce the interest rates. Most of these companies would rather you pay something than nothing at all.
  • Check your credit report annually. Determine if there are any unfamiliar accounts on your report. Notify the three agencies if anything seems untoward. These actions will only serve to keep your credit score at the same level or increase it.
  • Before making purchases, check online first. There are several highly-touted coupon and rebate sites where you can obtain cash back on any purchase and/or save on shipping. In addition, there are many many websites that offer printable food coupons. Utilize them as they will save you money. View the store circulars for sales; cut out coupons from the Sunday papers; and shop on sale days.
  • To save on utilities, shut the lights before you leave a room. Unplug any appliances not in use. Keep the thermostat to the recommended setting in your home and in the refrigerator. Call your telephone company and get rid of all the extras you may not need such as call waiting, caller ID, voice mail, etc.
  • If you have cable, call the cable company and discontinue the premium cable channels. Ask about their bundle - internet/phone/cable. You may be able to save money combing all three.
  • Keep your car well-maintained.
  • Ensure that you clean your air conditioner filter frequently. During the summer months, keep the A/C on energy saver. All appliances should have the energy star label.

These are just a few tips on how you can avoid bad debt. During these uncertain times, anything can happen and you have to be prepared for it.

Finally, stay healthy. As you know, healthcare costs are consistently rising. Thus, it is important to maintain a proper diet and exercise program to insure you or anyone in your family does not become ill and incur huge medical expenses.

If you stick to the family budget, reduce the amount of spending, and begin paying off any debts you have, the avoidance of bad credit will no longer apply.