Not Properly Handling Finances Could Lead to Credit Repair Need

When you're trying as hard as you can to manage your household budget, there are a lot of very simple mistakes you can make which are, in and of themselves, not necessarily going to be disastrous. However, these can add up quickly and create a very serious fiscal issue for you to deal with, and that in turn could put your credit at significant risk.

The problem that almost all people face when they try to keep all aspects of their finances under tight control is that there usually isn't enough money to go around related to achieving all their goals. This difference between an ideal situation and reality is where you might fall short and start to make serious mistakes that can endanger both your financial and credit standings overall, and therefore you should really try to do as much as you can to make sure you're not inadvertently avoiding anything that would be putting you at greater risk.

The good news as far as this kind of thing goes is that you probably know all the basics that you should avoid when it comes to these issues, and so simply brushing up on these simple ideas can probably go a long way.

What are the biggest pitfalls?
When you're trying to manage your finances successfully, you might be paying all your bills on time, and spending within a set budget, but those are largely obligations which you'll know about in advance. But are you set up to make sure you have a potentially large amount of money to cover any emergency expenses you may run into, such as auto repairs or a medical bill? If not, you might need to concentrate on building an emergency fund to ensure that any issues you might have to deal with can be handled responsibly. Otherwise, you might have to put a big bill onto your credit cards, and that can potentially end up costing you a lot of money in the long run, in addition to bringing down your credit scores and potentially increasing your need for credit repair.

Another major issue that many consumers fall into when it comes to their finances also relates directly to their credit: If you address your bills only with the minimum payments listed every month, you will end up paying a lot more for your balances over the course of the months or years it takes you to reduce them to zero. Federal law requires that every dollar you pay into any credit card balance above the monthly minimum must go toward cutting into the principal balance, rather than the interest you've accrued, meaning that your debt will fall more quickly and also grow more slowly in the future. Paying the minimum every once in a while on a bill or two while you're addressing other financial issues might not be so bad depending on your situation, but if you make a habit of doing so, you'll have serious problems down the road.

Further to that point, any time you miss your deadlines, you're going to take a major hit in terms of both your finances and your credit. Depending on the wording of your accounts, missing a deadline by even one day can lead to penalty interest rates and fees that can make your debt grow quickly. In addition, because payment history makes up the single largest portion of your credit scores (35 percent), even one missed deadline can bring your score down by 100 points or more with ease.

Don't stick to bad habits
Of course, the above tips assume you have been diligent in budgeting and saving, but if you haven't you'll need to start very soon if you want to get the ball rolling on fixing credit mistakes you've made in the past. Sitting down and figuring out what you earn and spend every month may show some disturbing trends that you let creep up on you without even noticing, and once you have that information you can also put together a plan that will help you fix all the mistakes you made over time. The process isn't easy, and it may take more than a year before you're in relatively healthy shape, but the end result will certainly be to your benefit for a long and happy financial life.

One way you can check where you stand, which some people may not think of, is to order copies of your credit reports from each of the three major credit bureaus regularly. Doing so will show you not only where you stand on each account in your name, but also whether any unfair markings appear on the documents. If so, you might want to contact a credit repair law firm, as this may help you sort out the issues quickly.