• About
  • Credit Card Basics
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives
  • Insiders

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

5 Telltale Signs That You’re Headed for a Credit Crisis

By Sabado Domingo

Credit CrisisYou don’t have bad credit — yet. However, anyone can make a mistake that leads him or her down the wrong credit path. Fortunately, bad credit isn’t usually something that develops overnight; instead, credit errors compile over time to transform a person into a lender’s nightmare.

As long as you remain vigilant for these five early warning signs, you can maintain your good credit:

You’re Paying Off One With Another

The best financial advice you can get is never to spend more money than you have, but sometimes — especially after the holidays — cash is tight and credit is your only recourse. However, every month you must make your minimum payment, and if your savings still haven’t caught up, it can be tempting to use one credit card to pay for another.

The truth is that using a low-interest credit card to pay off a high-interest credit card makes sense, but in reality, it rarely works the way you want it to. Few credit card companies will accept another credit card number as payment, which means you have to use costlier tools — like cash advances and convenience checks from credit cards — to make such payments. Additionally, once you clear the debt from one card, you will likely be tempted by its zero balance to use it again, once again accruing expensive debt.

If you find yourself tempted to use one card to fund another, you may find a balance transfer to be a smarter strategy. Some balance transfers even boast fantastic promotions, such as 12 months with 0% interest, that can help you catch up to your credit debt without making major mistakes.

You Like the Look of Cash Advances

Most places take plastic nowadays, but sometimes you absolutely do need cash. If your wallet is empty, most credit cards allow you to take cash quickly and conveniently from ATMs — at a cost. Most credit card companies charge copious fees for cash advances as well as higher interest rates that kick in immediately after the transaction takes place.

Taking a cash advance is borrowing money under the worst possible terms, and it is a sign that you are desperate for money and disorganized with your finances. If cash advances are starting to look like a good way to get your hands on dollar bills, you should reconsider your credit situation.

You’re Always Pushing the Limits

When you get approved for a credit card, the company sets your credit limit based on your history. If you are lucky, your company will periodically raise your limit based on your behavior. However, just because you have been awarded with $2,000-worth of credit doesn’t mean you should use all of it every month. In fact, spending even close to your maximum could severely damage your credit score and make it more difficult to attain low interest rates in the future.

Your credit score is calculated using a complex set of data, and your credit utilization ratio — a comparison of your used and unused credit — factors heavily into the health of your score. In the past, experts claimed that using up to 30% of your monthly limit was safe, but modern credit scorers suggest that less than 20% is best.

You Miss Deadlines

Every month, you have bills due. Your house, your car, and your credit cards all require some minimum payment every 30 days, and if you fail to pay on time, you will suffer major consequences, such as accrued interest, fees, credit score decreases, and more. Whether you miss your deadlines due to lack of funds or the dates simply slip your mind, you must maintain a payment schedule to ensure the safety of your

You Can’t Keep Track of Your Debts

I know you have debts — after all, you bought a house, you lease a car, and you have plastic in your wallet. However, the more debts you have, the harder it is to keep them organized, and eventually, you might start to lose track of how much you owe to whom. When this happens, you can easily miss payments, pay too little, and incur massive fees that damage your financial stability.

Once your symptoms progress this far, you may be on the verge of a considerable credit crisis. And that means it might be time to contact a professional credit counselor to help you manage your finances and regain control of your debt.

Photo Credit: stock photo

Related Posts:
  • 8 Telltale Signs You Picked the Right Career8 Telltale Signs You Picked the Right Career
  • 8 Tips for Surviving a Financial Crisis in Your Relationship8 Tips for Surviving a Financial Crisis in Your Relationship
  • Economic Collapse 101: What Causes a Currency Crisis?Economic Collapse 101: What Causes a Currency Crisis?

2 Comments January 7, 2016

Comments

  1. 1

    Jayson says

    I am definitely in credit crisis after this holiday season. I have to pay my bills after the other. I hope that I can manage to pay it off as soon as possible as I still have other debts to pay such as student and car loans.

    Reply
  2. 2

    Yasir Khan says

    Unable to keep track of your debt will definitely bury you down and leave you bankrupt. Having credit is good but you need to be responsible when it coming to paying it off so that you can be financially well in the end.

    Reply

Leave a Reply to Yasir Khan Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Question of the Week:

How old were you when you bought your first home?

View Results

Loading ... Loading ...

Recent Posts

  • Great Tips and Strategies for Successful Mortgage Refinancing
  • 14 Kitchen Hacks for People Who Can’t Cook
  • How Much Gold and Silver Should People Own?
  • Black Coffee: Smiling Faces and Reassuring Voices
  • Expecting the Unexpected: Managing Finances When You Become Disabled
  • 100 Words On: Why Buying in Bulk Is Not Always a Smart Idea
  • The Importance of Creating Professional Invoices for Your Business
  • 7 Basic Financial Goals Everyone Should Strive For
  • 10 Key Characteristics of Debt-Free People
  • Black Coffee: Egg Nog and Seed Corn

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Occasionally, some articles may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Popular Now:

  1. 1. Sneaky Pizza Delivery Fees Are Here to Stay (and Why It’s Your Fault)
  2. 2. Debt Elimination: The Pros and Cons of Dave Ramsey’s Baby Steps
  3. 3. Drop the Guilt: How to Splurge Without Beaking the Bank
  4. 4. How to Find a Low-Priced Plumber Who Won’t Rip You Off
  5. 5. 11 Retirement Saving Tips for Twentysomethings (& Older Folks Too!)
  6. 6. 16 Extreme Ways to Increase Your Monthly Savings
  7. 7. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  8. 8. The 13 Most Important Items to Keep In a Fireproof Safe
  9. 9. Be Careful, Priceline Users: Name a Wrong Price and You May End Up in Jail
  10. 10. Len Penzo dot Com: Celebrating 10 Years and 10 Million Page Views!

All-Time Most Popular:

  1. 1. 19 Things Your Suburban Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending You the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Copyright © 2019 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

Copyright © 2019 · Penzo on Genesis Framework · WordPress · Log in