Successful credit repair just feels good. Suddenly, nagging financial troubles are behind you, and a world of possibility opens its doors. Tread lightly during your first steps, however. The wrong move could land you back where you started. Resist the temptations below in order to stay steadfast in your efforts. Lasting credit repair requires perseverance.
• The temptation: A pre-approved credit card offer arrives in the mail, and suddenly you’re feeling appreciated. A higher credit score may well result in many offers from creditors who are ready and willing to loan you money. Although you may enjoy such new credit opportunities, ask yourself, “Do I need it?” Unless your credit score would directly benefit from a new account, skip the urge to sign up for more debt. And remember this even when you do acquire new cards: Don’t regard a new credit line as an excuse to spend more money that must eventually be repaid.
• The temptation: Rewards points won’t earn themselves! Credit cards offering rewards are a welcome bonus to millions of users. Frequent flyer miles and “cash back” are among the biggest payoffs. While you may be thinking, “I can’t cash in on rewards unless I spend,” think back to your credit repair efforts, and reassess. If you are an avid traveler, think about how much money you would need to spend in order to secure a free round-trip ticket. Now calculate the interest accompanying the balance. Chances are, you would need to spend thousands in order for the rewards to pay off (not including interest). If you have your heart set on a getaway, why not save the money and take advantage of online deals instead? The bottom line: if credit repair is your top priority, don’t allow shiny credit perks to deter you.
• The temptation: Zero balances mean plenty of room for spending. If you are like many consumers, you may view a zero-balance credit card as “money to spend.” In reality, keeping your credit utilization ratio low will fuel your credit score health. For example, a card with a $10,000 limit should never have more than a $2,500 balance—or 25 percent of its total. Employ common sense when it comes to spending. If you don’t have $10,000 to spend, then you can’t afford to charge it to your credit card. That’s borrowed money you’re spending.
• The temptation: A bonus or raise at work provides you with a multitude of extra cash. A raise can present new opportunities in your life, but why squander the money? Credit repair efforts are strengthened by low debt, high savings, and diversification. Why not use your new budget for long-term betterment? Consider paying off more debt or establishing an emergency fund. Use a portion of the money to invest in an IRA or other retirement vehicle. A better life requires smart choices—don’t be swayed by short-term comforts.
• The temptation: Upgrading never hurt anyone, right? Ridding yourself of credit card debt will lift an enormous weight off your shoulders, both emotionally and financially. You may also find yourself with a little extra spending money and the urge to celebrate. Think carefully about the ways you choose to reward yourself. Upgrading your revolving expenses can be a risky venture. Consult your budget before upgrading your:
o Living situation, i.e., rent or real estate costs
o Phone and internet plans
o Gym or other yearly memberships
Celebrating should never cause burdensome results. Give yourself the gift of financial freedom instead.