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Credit & Debt


You sometimes need to take on debt, usually by using credit cards, in order to make purchases. This can quickly become an issue if you fail to make timely payments and ignore the consequences. Learn the basics of these concepts so that you can keep on top of your finances, and so that you are not surprised by anything in the future.

Credit Cards

Credit cards are more convenient and secure when compared to carrying around cash. However, you must stay on top of payments and recognize the true cost of purchasing goods with a credit card. Think of these as mini-loans: you can quickly get in trouble if you aren’t careful with how you use the money. Review the Annual Percentage Rates (APR) -- the monthly compounding interest that you need to pay on purchases that you did not pay back -- and stay alert so that you do not go over your credit limit, pay late fees, or become a victim of fraud.

Credit Score vs. Credit Report

Your entire financial history -- getting loans, paying rent or a mortgage, opening bank or credit card accounts, etc. -- is recorded by your credit report. Your credit score plays a part in determining how well you have handled your finances, but is a more immediate gauge of your financial well-being. We suggest that you review your status by receiving your free credit report at www.annualcreditreport.com from the three primary institutions (i.e., Equifax, Transunion, and Experian). You can get one of these reports every 4 months, instead of all 3 at once, to get a better and more frequent sense of your finances.

Understanding Debt

Taking out loans or incurring debt can sometimes be necessary, but can also be a slippery slope. Staying on top of your loans and understanding the terms and conditions from the lender are essential for being a responsible borrower. You know that debt has been a problem for you if your checks bounce, you continuously incur late fees, and bills start “piling up.”

One major way to beat debt is to write everything down and keep the list visible, so that you can keep track of the debt that you owe. Once you get to that point, start thinking about how to pay off the debt. Consider the realistic expectations that you can place on yourself, and understand that doing anything is better than nothing -- don’t get discouraged.

Debt Recovery & Financial Assistance

You should be informed about loans before you take any out or borrow money from any lender. Your financial decisions can influence your credit and thereby alter your future forever. You should check your credit report every 4 months by going to www.annualcreditreport.com and requesting your information from one of the three major institutions (i.e., Equifax, Transunion, or Experian). This will help you keep track of your credit and appropriately manage your finances.

Before signing on to a new credit card, loan, or mortgage, you need to read and understand all the terms and conditions. There should not be any surprises later on as you start to pay off the debts. Be sure to read all documents before signing them, and take loans out from only those companies that you can trust. Check with the Better Business Bureau (www.bbb.org) or a similar organization to verify the quality of a lender.