7 Essentials of Building Good Credit

Establishing good credit is a financial necessity. Good credit will allow you to make large purchases, acquire a home loan, rent an apartment, and buy a car. You will also save thousands of dollars with a lower interest because of a high credit score. But where do you begin and how do you maintain good credit? Here are 7 essential ways to build good credit:

1. Establish credit by borrowing money or getting a credit card
2. Limit purchases to what you can pay off each month
3. If you have a balance, make payments on time
4. Avoid too many lines of credit
5. Do not max out your card
6. Check the three major credit bureaus to see if you’re credit is reporting correctly
7. Keep all documents concerning credit in a safe place to avoid identity theft

Establishing Credit

The first place to start building good credit is to obtain a loan or credit card. It seems rudimentary, but some people think by avoiding credit cards they are somehow being financially sound. True, you won’t accumulate debt if you don’t have any form of credit. However, unless you can pay cash for a home, car, or other large purchase, you’re going to need good credit. Even purchases you can afford with cash can be restricted or denied if you don’t have credit, like renting an apartment or certain types of insurance.

Within Your Limits

Now that you have a credit card, do not assume it is simply free money you can use without consequence. You should plan ahead and make sure you have enough money, typically in a savings account, with which to pay off your purchases. You may even earn rewards by buying gas, clothing, or hotel rooms with your credit cards.

Payment History

If you must carry a balance on your credit card, do it wisely. Even a relatively low interest rate for a credit card can still cost you thousands if you accrue a large balance. A $5,000 balance at 18% will cost you approximately $7,000 alone in interest of you only make minimum payments. Nevertheless, making payments on time will reflect well on your credit report.

Lines of Credit

Accumulating too many credit cards will make using them extremely tempting. When you amass debt and your income stays the same, your debt-to-income ratio suffers. Also, lenders look for new lines of credit when you apply for a loan. If you have recently acquired several credit cards, the lender may consider that risky behavior and deny you for the loan.

Maxing out your Credit Card

Another criterion lenders look for is the total debt you have compared to available credit. Maxing out your credit cards shows you not only have more debt but are in danger of overspending; subsequently, resulting in the inability to repay that which you owe or possibly lead to bankruptcy.

Credit Bureaus

Think of your credit report as a car. Your car needs routine check-ups to make sure it’s running properly or you could break down unexpectedly. The same applies to your credit. Allowing even a seemingly trivial mistake or idiosyncrasy to go unexamined on your credit history could cause major problems down the road. The three major credit bureaus you should routinely check are Experian, Equifax, and TransUnion.

Keep Yourself Safe

It is estimated that over the last five years identity theft has cost nearly 27 million consumers over 5 billion dollars. Thus, it is imperative you protect your confidential information from falling into the wrong hands. Trying to prove your innocence and expunge the detrimental effects of identity theft can cost a great deal of time and money. Unfortunately, you are guilty until proven innocent when it comes to credit.


You truly can control your financial future by building good credit and maintaining a good credit score. The benefits will save you thousands and make important purchases available to you. However, if you suffer from exceedingly high debt, you need to seek professional help. Waiting merely another month can cause your plummeting finances to crash. Due diligence and discipline are required to find and implement a successful financial plan, but a debt free life is in reach.

6 Signs You Need Debt Settlement

Credit card debt is not uncommon in America today, but how do you know when your debt is out of control? Here are six warning signs your debt is a major problem.

• You consistently make only minimum payments on your credit cards


• You receive demanding letters and phone calls from creditors


• You have depleted your savings account to pay credit card bills


• You hide your spending from your spouse and familiy


• You have made three or more late payments in the past twelve months


• You consider bankruptcy as a solution to your debt

Minimum payments on Credit Card Debt

Credit card debt can be very misleading since your monthly payment can be very low compared to your overall debt. For instance, the minimum payment for $20,000 of debt is only around $400 per month. This can allow you to make large purchases and only pay a small portion of the debt. However, if you only make minimum payments on your credit card debt, that $20,000 debt will take you more than 30 years to repay. You'll also pay double or triple the borrowed amount in interest charges alone. Only paying the minimum payments on credit card debt will slowly but surely drain you financially.

Demanding letters and Phone Calls from Creditors

Banks and credit card companies often use demanding letters and phone calls to collect late payments and fees. If you are the receiving these threatening letters and phone calls, you are not only in serious debt but your credit score is in jeopardy. Creditors report every missed or late payment you make, and an excessive amount of absent payments is extremely detrimental to your credit rating.

Depleted Savings Account

A savings account is used to build for the future, but you are in financial danger if you constantly tap into your future reserves to pay credit card bills today. A portion of your income should go into some form of savings. A sign you have over stretched your budget is if you have not only stopped saving, but use your current savings just to make minimum payments on credit cards.

Hiding Your Spending

Money is one of the top five reasons people give for divorce. Many people hide their overspending from their partners because they feel embarrassed and want to avoid conflict. Yet, marriage ideally is a partnership, and when one spouse discovers hidden purchases, trust is broken. If you find it necessary to keep spending habits secret from your significant other, you have a dangerous amount of debt.

Late Payments

Your payment history constitutes approximately a third of your credit rating. If you make three or more late payments in a year, your credit rating will significantly suffer. Nevertheless, the cause of late payments gives more rise for concern that the effects. If you are living paycheck to paycheck, unforeseen events can cause you to miss a payment. You cannot overcome debt while incurring late penalties, especially when you're only making the minimum payments on credit card debt.

Considering Bankruptcy

Bankruptcy is a decision that will destroy your credit for seven to 10 years and permanently change your life. Some people make the mistake of filing for bankruptcy without first considering the alternatives. Debt consolidation is a debt-relief method that involves combining your debts and lowering interest rates. Debt settlement is another debt-relief option, but debt settlement actually reduces your overall debt instead of merely combining balances.

If any or all of these warning signs are applicable to your financial situation, you need to act quickly before debt ruins your life. Millions of Americans suffer from the unwanted stress debt produces. The first step in conquering debt is overcoming the fear of letting someone help you. A reputable company with a proven debt-relief method, such as debt settlement, will guide you toward a debt-free life. The choice to become debt-free will be the best financial decision you ever make.

Payday Loan Cap for Military Personnel

The Talent-Nelson amendment to the Defense Authorization Bill, which takes effect October 1, 2007, is a response to reports that predatory payday lenders exploit military personnel. The amendment caps the annual interest rate on payday loans for military personnel at 36 percent; prohibits the use of a personal check to access the borrower's bank account; and forbids the use of a vehicle title as collateral for payday loans.

Payday loans are popular among military families because unexpected deployment, financial inexperience, and costs abroad make cash advances extremely appealing. However, the Pentagon reported that predatory payday lenders were burdening military personnel and comprising military readiness. Some military families have sought debt consolidation and debt settlement as a means to escape financial hardships caused by payday loans.

The amendment could be a precedent used by Congress to legislate and restrict the general practice of payday loans. Borrowers can pay up to 400 percent interest on payday loans due to excessive fees and interest spikes. A national usury cap for predatory payday lending may be on the horizon. For now, military families will be the first affected by such legislation.