After bankruptcy there is a rebuilding period of your finances. Here are some things to keep in mind going forward to help the process.
Overcharging is the primary cause of credit problems. However, there are some other common credit mistakes that can work against you financially.
1. Not valuing your credit
Good credit is a valuable commodity in today's economy. Bad credit, including a bad credit record, late payments, etc., can create a negative financial profile that can surface when you have a legitimate need to borrow. Buying a home is a necessary use of credit that few people can avoid. Abusing short-term credit obligations, or over-extending through short-term debt, can cause a mortgage lender to reject your application for a home mortgage.
2. Allowing a need for status to overrule common sense.
Most credit card companies now offer a "status" card, targeted to the consumer's desire to have the very best of everything. Status cards often have higher credit limits, more frills and the highest annual fees—from $75–$100. Avoid paying extra for status. The basic card from the same company offers the same basic features and a much lower annual cost.
3. Raising credit card limits
If you use credit cards, avoid raising your limit. An increased limit is merely an increased temptation to buy. Many companies notify you that they are raising your limit. Take such notices as a warning signal. If you're such a good customer that the card company wants to give you more credit, chances are you've been using your credit card for more than emergencies! To refuse an increase simply call or write the card company and say, "thanks, but no thanks!"
4. Not monitoring your credit
You must know where you stand. Lenders get a snapshot of your debt repayment history with your credit report and it is important for you to know what they are seeing. You can review your credit report once a year for free.
5. Not knowing your interest rate and fees
Fees vary widely among cards. Always make sure you know what the rate and annual fees are before you accept the card. If you have existing cards, check the rate you're paying and if it's high, shop for a card with a lower rate.
These common mistakes could cost you hundreds or thousands of dollars—dollars you could instead be using to build financial security.
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