But for those of us with credit cards, this is a very good reminder of how carefully we should be using our credit. There's a right and a wrong way to go about it.
If it hasn't been a priority before or even if it has, do your best to get your debts paid down. This will give you more flexibility and make you look better if you need credit for something later. Falling home prices can mean good deals when things get a bit better, and if you can continue to manage your credit well, you may be in a good position to take advantage.
The short term impact for many has been that they have to cut spending because they don't even have access to more credit so they can spend more. Many people have relied for years on credit to keep up lifestyles they couldn't maintain any other way. It becomes important to spend only on essential items.
This is a time to learn about good spending habits, ones you should keep for a lifetime regardless of the economy. There are right and wrong reasons to use credit.
Good reasons include buying a house. Even if home prices drop significantly, most people would not be able to save enough to buy a home out of their savings. It would take an impractical number of years for most. Doesn't mean you can't, but most won't have that kind of control.
Emergencies are another good reason to use credit. Sometimes there's just no other way you can get through the situation.
And of course, you should use a little credit just to keep your credit score healthy. Using your credit card and paying it off monthly will help to show that you mean to have good credit.
The bad reasons are of course more fun.
There are the lifestyle reasons, such as keeping up on the latest technology. You NEED that big screen plasma or LCD television, right? The new cell phone even though the old one works? The treadmill you'll use only as a place to hang your clothes?
Buying something fun isn't necessarily a bad thing, but particularly now with the credit situation so poor, it's best to not do so unless you can actually afford what you're buying. A little extra thought can cut out quite a number of purchases.
Depending on who you ask, this may be an economic hiccup or it could be a much deeper downturn. There's no way to know which it is yet, but it's better to plan for the worse situation and be surprised by the better, than to assume the best and get slammed by the worst.
For those smaller business entrepreneurs, in order to help fix the problem, you need to first face your real credit score. Despite free credit report offers, you still have to pay to find out your score, which is a three-digit number ranging from 300 to 850.
Here's how: Go to MyFico.com, or you can get Experian's "consumer education" credit report. Following you will find some credit repair tips:
1) Try to use your credit cards less often if not sparingly. Totaling up big balances can hurt your score, regardless of whether you pay your bill in full each month and on time.
2) Don't hire a service to "fix" your credit. "Don't believe these claims," says the Federal Trade Commission (FTC): they're very likely signs of a scam. The attorneys at the nation's consumer protection agency say that they've never seen a legitimate credit repair operation making those claims."
3) The fact is there's no quick fix for creditworthiness. You can improve your credit report legitimately, but it takes time, effort, and sticking to a personal debt repayment plan.
4) What is reported to the credit bureaus and calculated into your score is the balance reported on your last statement.
5) Try to pay down or pay off credit cards. The credit-scoring system is based on favorability towards a gap between the amount of credit you're using and the available credit limits.
6) It is a good idea to rotate your credit cards. The older your credit history per card, the better it is, so if you stop using a card, the issuers may stop updating the account at the credit bureaus, and it won't be given as much weight in the credit-scoring formula as active accounts.
7) Make sure to keep tabs on your credit limits. Charging the same amount each month -- say $500 to $800 -- makes the credit-scoring formula think you are you're regularly maxing out the card. Simply pay your balance down or off before your statement period ends.
8) Accounts receivable factoring is an age old tactic that could help you pay off credit your card debt. Single invoice factoring provides immediate cash flow.
Factoring is regaining popularity as a surefire method of financing to improve the cash flow of a business. If you still don't understand it -- factoring is when a company decides to discount its accounts receivables, at which time the factor then bears the credit risk for the accounts and becomes the recipient of payment from the customer. Factoring is one of the most effective and efficient forms of financing, or funding a small business with cash flow today.
Both Stephanie Foster & Kristin Gabriel are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Stephanie Foster has sinced written about articles on various topics from Credit Cards, Shopping and Pets. Stephanie Foster blogs at about using credit wisely. Stephanie Foster's top article generates over 823000 views. to your Favourites.
Kristin Gabriel has sinced written about articles on various topics from Cure Anxiety, Heart Diseases and Aging Problems. Kristin Gabriel is a writer who works with The Interface Financial Group (IFG), North America's largest alternative funding source for small business. The company provides short-term financial resources including. Kristin Gabriel's top article generates over 90500 views. to your Favourites.