How to Overcome Your Personal Finance and Credit Fears

credit and finance

Despite what people say about how money can’t buy happiness, every aspect of your personal finances — from the money you have in the bank to your credit card balances — affects your emotional and physical well-being. Moreover, your creditworthiness and overall financial standing impact everything in your life, from what you eat to what you drive and from where you live to where your children go to school.

When your financial situation goes from comfortable to rocky, you may try to block out the ensuing negative emotions by avoiding your financial situation entirely. Avoidance is unhelpful and it can also be damaging. If you’re tempted to bury your head in the sand, consider these tips to help you overcome your fears and work toward a more secure financial future.

Fear #1: Checking Your Credit Report

Unless you have a stellar credit history, checking your credit report can feel like checking your report card in grade school. Credit reports, as of 2019, include information regarding open accounts and amounts owed, length of your credit history, history of late payments, accounts in collections, new credit inquiries and more. If you have a rocky credit past, it’s only natural to hesitate to review it.

The Fix: Focus on Your Potential. There are a lot of benefits that come from checking your credit, even if you’re not where you want to be. Every year, you’re entitled to receive a free credit report from each of the three credit bureaus. Looking over these reports can help you know where you’re struggling the most, where you’re doing well, and if there are any errors that are negatively impacting you.  

Fear #2: Checking Your Credit Scores

credit score check

If you’re like most consumers, you know you have a credit score. The truth is, you actually have dozens of credit scores. You read that right — dozens. As if that’s not stressful enough, know that not all scores measure the same factors the same way, which makes it difficult for consumers to determine which scores to give more weight. 

The Fix: Go Straight to the Source. If you just want to get a broad overview of your credit-worthiness, refer to your educational credit scores. However, if you want to know about, say, your odds of getting good rates on a home loan, refer to your FICO score, the number-one rating 90% of lenders use when making lending decisions.

Fear #3: Debt

The average American household carries over $8,000 of credit card debt. High levels of debt can result in poor credit, the inability to cover monthly expenses and unwanted stress. Debt comes in many forms, ranging from mortgage payments to student loans to medical expenses. If you’re living with sky-high debt, it may be tempting to take on an out-of-sight, out-of-mind approach. However, the issue with this attitude is that it can result in compounding interest, late fees and dings to your credit score, all of which make your financial situation worse, not better.

The Fix: Financial Counseling. It’s easy for anyone to get into debt but not so easy for most people to climb out of it. If you need help getting your liabilities under control, don’t be ashamed to reach out to a financial planner or credit counseling agency. The right person can help you put your situation into perspective, prioritize your payments and develop a doable repayment plan.

Fear #4: Savings

emergency savings

If you don’t have a substantial nest egg, you’re not alone. As of the end of 2018, 58% of Americans had less than $1,000 in savings, which is 16% more than the year prior. Approximately one-third of Americans have absolutely nothing in savings, which is a slightly improvement on 2017’s survey results. The two most common reasons for such low savings rates are living paycheck to paycheck and low salary.

The Fix: Start Small. You don’t have to bring home substantial amount of money to prioritize saving. Look at both your monthly budget and your average spending and decide where you can make cuts. Cancel that $7 monthly subscription you rarely use and opt to make coffee on the weekdays instead of buying a gourmet latte every morning. Cutting out little expenses like these can add up to millions over time.

Fear #5: Lack of Knowledge

Knowledge on the subject of credit and finances is not intuitive, and no matter how successful or “put together” a person may seem, chances are he or she has just as many financial-related questions as you and any other average consumer. That said, lack of knowledge is not an excuse to not get your affairs in order.

The Fix: Make Learning a Habit. Educating yourself on finances or credit factors doesn’t have to be difficult or a drag. There are hundreds of free resources available online (including this blog) for individuals who wish to learn more about the factors that affect their credit scores, retirement and paying off debt. You don’t need to set aside a lot of time to brush up on your financial knowledge. Rather, make it a point each week to read just one or two finance-related articles. Arming yourself with the right knowledge can take the fear out of finances and also can equip you with the know-how to make informed decisions that will better your financial future.

Get on the path to a secure financial future. Lexington Law Firm’s team of professionals has over a decade of experience helping clients repair their credit. Call us today for a free personalized credit consultation.

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Article Updated May 15, 2019

Sources: GoBankingRates | Experian | MyFico