Certain decisions can quickly turn your credit upside down, and many consumers may not realize what happened until it’s too late. Some common credit mistakes that are made often include:
Only making minimum payments
One common misconception when it comes to credit is that making timely, minimum payments is all it takes to maintain good credit. However, over time, making just minimum payments may actually harm your credit and will end up costing you a lot more money. Minimum payments will keep you from defaulting, but if you have a lot of debt, it won’t go anywhere anytime soon. Unless you have a very low-interest or no-interest introductory loan or credit card, bear in mind that the majority of minimum payments will go towards interest charges. This means that when you only make a minimum payment, you barely make a dent in your principal balance. If you keep charging on the same account every time you have a little bit of available credit, the cycle will never end until you begin making larger payments. And if you only make minimum payments on accounts that are maxed out or close to the limit, your credit utilization will be high, which can eventually cause your credit score to drop. If you can only afford to make minimum payments, it is certainly better than skipping payments completely, and will help you to avoid more serious consequences. However, even just paying a little bit more than the minimum can help. If you haven’t already, create a budget and try to see what spending you can cut down on or even eliminate completely. Make a plan to take that money and put it towards your credit card balance. If your balance is high and you can’t make larger payments, you’ll want to avoid charging more on that account until you’ve paid off a significant amount of the debt.
Taking out risky loans
In attempt to get out of a tough financial situation, some consumers will turn to risky loans as a last resort. These short-term fixes to a long-term issue can result in serious problems, however. Because these loans tend to come with very high interest rates, it can be difficult for many consumers to pay them back in a timely matter, especially if they are already experiencing financial difficulties to begin with. This can put them further into debt, or if the risky loan they took out was secured, they could lose the item that was used as collateral. A car title loan, for instance, is an example of a risky loan that uses the borrower’s car as collateral. If the borrower is unable to pay back the amount borrowed, the lender has the right to take ownership of the debtor’s car.
Do you need money to catch up on overdue debt and accumulating bills? If you’re receiving structured settlement payments, Peachtree Financial Solutions may be able to help get you your money sooner. By selling some or all of your future payments to Peachtree, you can receive your money in one lump sum. Contact Peachtree Financial Solutions today to learn more about selling some or all of your future payments for a lump sum of cash.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.