Irresponsible Borrowing Means Wary Creditors
Even for the best of us, getting a loan is anything but a piece of cake. But when you are a person with bad credit, and you need a loan, getting it won't be easy. Unsurprisingly, if you've shown that you're an irresponsible borrower then it's only to be expected that creditors will be a little wary when you try to get a further loan.
It is only fair, isn't it? After all, you have proved to be an irresponsible candidate in the past. Every lender is here to do business. They are not going to help you out of the goodness of their hearts. Instead of sitting around sulking, objectively look at the situation. Failing to meet the minimum repayments for loans in the past, as well as generally being a little late on your bill payments, can only ever work against you.
Simply put, creditors don't want to have to wonder whether you're going to end up being a major loss financially or if you've been able to change your ways and become a responsible borrower. People who prove to be good debtors by repaying their loans on time are bound to get a good deal. They have won the trust of their creditors. If there have been instances where you have proved beyond doubt that you are aware of your responsibilities, creditors will take a liking to you.
As well as proving to the creditor that you're worthy of loan, you should also be aware that you have to prove to yourself - and your bank balance - that you can manage your money by keeping up with paying the interest, and any of the other regular financial maintenance that needs doing. If you fail to do that, either through general poor money management or some other reason, then there's almost no excuse for not telling your creditor. The best way to go about it is by keeping your creditors posted and discussing with them how your troubles can be ameliorated in the near future.
I shall not go off into a tangent and start discussing how you can get rid of your financial woes. But responsibility certainly includes being upfront with any trouble you might face that your creditor would want to know about. Do not hide your financial difficulties from your creditor. This would be a bad move. Once both you and your creditor have established that you're a responsible borrower, the borrowing process becomes a lot quicker and a lot smoother both for that loan and future ones.
Also, remember that you have a bad credit record to improve. Start working on it now. Ensuring that you've got a steady income is certainly one thing, but you've got to remember that burying yourself in debt now - especially if you borrow more than you actually needed - can only hurt in the long run. Securing a loan is not like playing marbles. Do you really require it? It may sound obvious, but few things are worse than finding that you're in debt for a completely ridiculous reason. A large burden of debt is never a pretty thing; certainly not when you are struggling to pay it off. So make sure you secure only as much as you need.
How To Be Responsible With Credit Cards
Credit cards are wonderful little things, but in order to get the most out of one, the best thing to do is just not use it at all. Yes, I know it sounds backwards, but the best way for a credit card to benefit you is to simply put it up somewhere and not use it unless you absolutely have to. If you do have to use it, pay it off every month and watch your credit score skyrocket. Love them or hate them, but no matter which one you are, you have to admit that the cards can be useful as long as they are not abused. There are a few different dos and don'ts when it comes to having credit cards and as long as you know them, you should do just fine.
One of the first rules of having a credit card is to pay off the balance every month, if at all possible. Now, a lot people get to the point where they have to rely on their card for a month or two until they get back on their feet from being laid off or from being injured and unable to work, but in most cases, credit card debt can be almost completely attributed to abuse of the system.
What constitutes abuse? Purchasing things that you would not normally be able to purchase, like an entertainment system, jewelry, clothes, and etcetera without actually having the cash to cover the cost. A great rule of thumb to follow is if you do not have the cash to cover a purchase, you should not make that purchase. It is very easy to let yourself get carried away and overextend yourself financially.
The problem with credit cards is that when people get them, they automatically feel the urge to use them and quite often, that urge is not easily quieted by a simple small purchase here and there. No, you want to use it on something big. You have a $3,000 credit line, right? Why not spend half of it on a new big screen TV?
Interest. That's why not.
The interest that you can accumulate by purchasing a big ticket item such as a new television or an entertainment system can be huge and unless you are sure you are going to have the money to pay the purchase off quickly, steer clear of these things.
Another thing to steer clear of completely is using the card all the time for small purchases, because this can become even more habitual. You do not see the harm in using it for a $5 purchase here, a $10 purchase there, but those quickly add up into balances of hundreds or thousands of dollars and you will wonder how you spent all that money.
If you cannot pay off your card balance every month, you should realize that paying the minimum payment every month will not help you get the balance paid off for a very long time. It can take you a number years or even decades to pay off the balance on a credit card by paying the minimum payment. Avoid this at all costs. Another thing that you should do is to be sure to make your payments on time. You do not want to be subject to the late fees.
Unless you are responsible enough to keep your debt in other areas under control (such as house payments or rent, car payments, bills, services, and etcetera) without using the credit card to play keep up, then having a credit card is really not for you. Stay away from them until you learn to manage your finances well without them.
Credit cards are very useful for those responsible few of us who can handle them, but no one needs one. If you want the convenience of not having to carry cash, you could carry a debit card instead, but make sure you do not leave your pin number anywhere in your wallet or purse where a thief could gain access to it and your checking account. You can cancel your credit card, but it's harder to cancel the cash in your checking account if your debit card is stolen.
Avoid getting a cash advance on your credit card if at all possible. If you have a credit card, you should also have a checking account and most checking accounts these days come with the option of a debit or ATM card. Use this for your cash needs because you do not have to pay interest on the cash you withdraw from your own checking account.
If you have to have a credit card, at least attempt to get something back out of it by having a card that gives you rewards for spending money with it. The reward cards are only good, however, if you are responsible enough to use the card all the time and yet, not allow yourself to get in over your head in credit card debt.
Also make sure that you know your card's benefits. Some cards come with traveler's insurance or rental car insurance, so keep that in mind when purchasing plane tickets or renting a car, since the insurance may only be valid if the entire cost of the trip or rental was charged to the card.