How to Overcome Your Personal Finance and Credit Fears

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Personal finance isn’t limited to money in your bank account or your credit card statement: it’s an emotional subject. Your financial standing and creditworthiness affect everything in your life, from the home you live in and the food you eat to your family’s well being. When life feels unstable, the sum of these factors is often avoidance. If this sounds familiar, consider these tips to help you overcome your fears and improve your lifestyle.

Fear #1: Checking Your Credit Report

A credit report can feel like a grade school report card you’d rather forget. It includes current and past information like your mortgage balance, credit card balances, late payments, collections, judgments, and more. If your past was rocky, it’s natural to feel hesitant about reviewing it.

The Fix: Focus on Your Potential. Sure, you never want to think about that collection account again, but summoning the strength to check your credit reports can actually change things for the better. For example, the credit bureaus—TransUnion, Experian and Equifax—recently issued a statement saying that certain information will no longer appear on credit reports, including settled tax liens and civil judgments. Verifying your credit reports’ accuracy and adherence to new standards is the best way to ensure positive change.

Fear #2: Checking Your Credit Scores

Credit scores…plural? Already, you’re feeling overwhelmed, and it’s true, the average consumer has about 50 credit scores grading their financial prowess, and it isn’t always clear which one a potential lender will use.

The Fix: Go Straight to the Source. Educational credit scores are helpful when you want a general idea of your creditworthiness. That said, it’s a good idea to go straight to the source—FICO—for the credit score used by 90 percent of lenders.

Fear #3: Debt

Believe me, I get it. Outstanding debts can take over your life and cause unwanted stress. Whether it’s a high credit card balance, student loans, an expensive mortgage, or medical bills, it can be tempting to adopt an out-of-sight, out-of-mind philosophy. That said, the problem with this strategy is compounding interest that can accrue over time on your existing balances, causing them to become more overwhelming and unmanageable.

The Fix: Financial Counseling. Take a deep breath and meet this challenge head-on. Consult a financial planner or a credit repair professional for a fresh perspective. They will help you clarify the situation, prioritize and create a repayment strategy.

Fear #4: Savings

If you don’t have enough savings, you aren’t alone. According to a recent Equifax survey, 42 percent of Americans don’t have the liquid funds to cover a $1,000 emergency.

The Fix: Start Small. You don’t need an enormous income to make saving a priority. Cutting as little as 5-10 percent of your monthly budget could help you invest for retirement and build a liquid account for emergencies. If you need some motivation, check out our example of how $5 a day could add up to millions over time.

Fear #5: A Lack of Knowledge

Outwardly successful people seem to have all the answers, and you might feel too intimidated to ask your family and friends financially-centered questions. Credit and financial knowledge isn’t intuitive, and no one has the answers without doing some research.

The Fix: Make Learning a Habit. We may be biased, but learning about credit and finance can be fun. There are so many free resources available (including this blog) for those who want to brush up on the factors of credit scoring, learn how to save for retirement, pay off student loans and generally live a better life. Consider dedicating some time each week to the pursuit of education. Not only can it alleviate your fears, it can help you make well-informed financial choices.

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