Too Much Debt? Five Warning Signs

There is a fine line between credit-recommending debt and disaster. While a few lines of good credit will allow your score to shine, going overboard will accomplish the exact opposite. If you sense a tip in the scales, consider the following warning signs below. Recognizing these issues in yourself will help you decide if credit repair is the next step.

1. You Don’t Know “The Number.”

True or false: There is shoebox full of bills and/or credit cards in your home. Even if things haven’t escalated to this point, you have a problem if “the number” isn’t within your grasp. “The number” refers to the total amount you owe in credit card debt. To maintain a healthy credit utilization ratio, the amount owed should never exceed your total credit limit. The bottom line: If you avoid the facts and figures, you’re probably in over your head. Face the music and tally your number. Credit repair begins with the truth.

2. You Are Spending At Your Limit.

So, you know “the number” and you continue to spend to your limit. There are many reasons why this is happening. Maybe you are struggling to make ends meet. Maybe you are unaware of your limits. Maybe you don’t understand the finer points of credit utilization. Whatever the reason, maxing out your credit cards is a great way to slip deep into debt and drown in high interest rates. Do yourself a favor and switch to cash.

3. You Need Your Next Paycheck.

Everyone needs cash flow, but “need” is the very essence of your existence. You need your next paycheck because you can’t pay rent, utilities, student loans, etc. without it. You have no emergency fund and every penny counts. Pushing yourself to the brink puts you at greater risk for credit repair. Give yourself some breathing room and establish a savings account. Why carry the burden of unnecessary stress?

4. You Cannot Afford More Than The Minimum.

The advent of the minimum payment is a genius move by the credit card companies. While it may seem like an act of kindness, your creditors want you to repay your debt in small increments. The longer you pay, the longer the interest rates have to do their damage. If you cannot afford to pay more than the minimum, chances are your debt is high and you have overestimated what you can afford. Scale it back and reassess your priorities. No one wants to live with overwhelming debt.

5. You Surf. 

No, we’re not talking about a day at the beach. If you have ever taken out a loan to pay off other debts, you are known as a debt surfer, i.e., someone who shifts their burden from one lender to another. Unless you secure a lower interest rate in this practice, debt surfing is wholly ineffective and dangerous. Trading debt with debt is like holding onto a deflated life vest—you’re bound to sink sooner or later.