How to Return to Good Financial and Credit Health

Statistics told us, that prior to Christmas of last year, Americans were doing a pretty good job of decreasing their debt, especially on credit cards, plus they were in a savings mode too

But according to statistics recently released by the Federal Reserve, revolving debt (mostly credit cards) is up 5.1%. It is the biggest increase seen in this type of debt in over 3 years.

That isn’t completely bad news, as it signals a loosening of credit to some extent, a return to spending to some degree, and a return to marketing by retailers/businesses. More are actively seeking new customers once again. All good things.

But for some consumers, it also means that current financial stresses might have finally caught up with them (or continue) and they are being forced to place more expenditures on some form of credit.

In these instances, Americans are having to make some pretty heavy-hitting decisions as to the payment of their bills. They’re having to make tough calls on what bills to pay, in what order to pay them, how much to pay on them, and what priority must be placed on each. This issue is probably one of the most common questions I hear by those facing financial stresses.

Let me first say, there is no firm or concrete answer to this question. Each person has their own set of unique financial circumstances to face, so the answer and actions taken must be personalized to fit their personal financial scenario. But as a rule, the following is the guideline I give my clients as to: WHO to pay when these circumstances occur .. and WHAT bills should take priority when money is available to make payments.

Remember tho, if legal documents, judgments, or court orders have been put into play, this list might have to be revised accordingly. Ignoring legal issues (or placing them on a back-burner) is not wise. Also remember that, while stressful and very hard to deal with, threats of lawsuits or menacing phone calls by debt companies should not change the order in which you pay your bills.

Stick to a game plan that will protect and feed you, your family, your housing, your ability to get to your employment … there IS a pecking order of importance.

 My suggestions for bill payment, in order of priority:

Installment Loans
            Cars/Boats/Trucks, Etc.
Student Loans
Secured Loans (Collateral)
Revolving Credit (Credit Cards)
*  Gas Bill (Nicor in IL reports to TransUnion. In the IL/Chicagoland area it is the only utility that does so. In yourstate/region, check to see what utilities this might apply to and act accordingly.)
*  Collections (Do NOT ignore collections. Try to make monthly payment arrangements with any company that is threatening a collection. Be as pro-active with your debt and responsibilities as possible.)

Be aware also, that whether primary debt holder or co-signor on a loan … you are responsible for re-payment of debt according to the contract/agreement. So if you have signed for credit with a family member, friend, etc. … the debt will be viewed as yours too and your responsibility.

If that friend, family member, etc. that you signed for is suffering financial hardships/stress, or not making the payments as you thought they would, the debt/credit issues become yours to share in.

Perhaps the other suggestion I make when asked about credit and devising that “game plan” I speak of above, is this … don’t think you have to go it alone. There are plenty of opportunities for FREEfinancial/credit guidance and help out there.

As a mortgage lender, I can order your up-to-date credit report and offer timely, experienced guidance and assistance to face your credit/financial status. That is a very good start towards returning to good credit standing and good financial health.

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