There is always that one scene in horror films. Instead of running for help, the hero runs into the dark basement or the eerie forest. You yell at the screen, wondering how this character can be making all the wrong choices. But, imagine the scenario a little differently. What if instead of running for your life, you were navigating your credit health? Are you making all of the best decisions, or are you at risk of ending up in the dark basement with a scary credit score? Here are four pitfalls to avoid as you escape towards happily ever after.
1. Keeping up with the JonesesWhen I was in college, I drove a 1997 Nissan Maxima. The car was patched up with random car parts over the years. These cheap replacement parts came in so many colors that I named the car Two-Face. Two-Face sometimes embarrassed me when I saw other people driving sleek, new cars, but it was worth it for all the money I saved.
It can be difficult to ignore your friends' new purchases. However, unless you've been saving up or have extra funds lying around, it is probably in your best interest to say no to material gratification. The temptation is strong since it's so easy to charge everything to credit cards, but it's a lot harder to dig yourself out of debt. And when you can't pay back your debt, your credit will suffer.
2. Co-signing for someone with bad creditWhile helping a close friend or relative can be rewarding, you also need to look out for your own credit health. If this friend needs you to co-sign because they haven't established their own credit yet, and if you trust them, your credit shouldn't be affected negatively. However, if you suspect this person might not make payments on time, or if they already have bad credit due to poor decision making, you might not want to co-sign after all. Keep in mind that when you co-sign for someone else, you are basically taking on their loan as your own. Therefore, if they stop making payments, your wallet and credit health will suffer the consequences.
3. Not paying your library fines or parking ticketsWhen I was a kid, I had the bad habit of forgetting to return my library books. Back then, it was easy to smile toothlessly and feign innocence, so the librarians would waive my fees. As an adult, though, fines that aren't paid can end up at a collection agency, and smiling at the credit bureaus won't remove those marks from your credit report. Just as with unpaid library fines, unpaid parking tickets can also be turned over to collection agencies. Even after you have paid off the collections, these accounts can remain on your credit report for seven years, and creditors will see these red flags on your report. Even so, it is still usually better to fully pay collection accounts sooner than later. You wouldn't want the Twilight series or a street sweeping ticket to be the reason why you're not accepted for a new home loan.
4. Not communicating with your landlordEveryone has heard a story or two about a bad landlord. It's reassuring to think that the bad situation ends as soon as the rental contract does. Unfortunately, landlords can wreak havoc on your credit even after you've moved away. If they decide the place was left in an inappropriate condition, they can charge you for repairs and cleaning costs. Your security deposit can be used for these charges, but if the deposit doesn't satisfy the costs, they can send the bill to a collection agency. The best way to avoid seeing a surprising bill is by taking precautions. Save important documents, take pictures of the home before you move in and communicate with the landlord to ensure a pleasant ending to your stay.
In the end, it's worth it to stay proactive while protecting your credit health. Check your credit report regularly and make smart, thoughtful decision to stay in the best position possible. When it's all said and done, you don't want to look back at your younger self and feel like you're in the back of a movie theater, yelling in vain.
Author: Nazhat Salim
It can be difficult to ignore your friends' new purchases. However, unless you've been saving up or have extra funds lying around, it is probably in your best interest to say no to material gratification. The temptation is strong since it's so easy to charge everything to credit cards, but it's a lot harder to dig yourself out of debt. And when you can't pay back your debt, your credit will suffer.
2. Co-signing for someone with bad creditWhile helping a close friend or relative can be rewarding, you also need to look out for your own credit health. If this friend needs you to co-sign because they haven't established their own credit yet, and if you trust them, your credit shouldn't be affected negatively. However, if you suspect this person might not make payments on time, or if they already have bad credit due to poor decision making, you might not want to co-sign after all. Keep in mind that when you co-sign for someone else, you are basically taking on their loan as your own. Therefore, if they stop making payments, your wallet and credit health will suffer the consequences.
3. Not paying your library fines or parking ticketsWhen I was a kid, I had the bad habit of forgetting to return my library books. Back then, it was easy to smile toothlessly and feign innocence, so the librarians would waive my fees. As an adult, though, fines that aren't paid can end up at a collection agency, and smiling at the credit bureaus won't remove those marks from your credit report. Just as with unpaid library fines, unpaid parking tickets can also be turned over to collection agencies. Even after you have paid off the collections, these accounts can remain on your credit report for seven years, and creditors will see these red flags on your report. Even so, it is still usually better to fully pay collection accounts sooner than later. You wouldn't want the Twilight series or a street sweeping ticket to be the reason why you're not accepted for a new home loan.
4. Not communicating with your landlordEveryone has heard a story or two about a bad landlord. It's reassuring to think that the bad situation ends as soon as the rental contract does. Unfortunately, landlords can wreak havoc on your credit even after you've moved away. If they decide the place was left in an inappropriate condition, they can charge you for repairs and cleaning costs. Your security deposit can be used for these charges, but if the deposit doesn't satisfy the costs, they can send the bill to a collection agency. The best way to avoid seeing a surprising bill is by taking precautions. Save important documents, take pictures of the home before you move in and communicate with the landlord to ensure a pleasant ending to your stay.
In the end, it's worth it to stay proactive while protecting your credit health. Check your credit report regularly and make smart, thoughtful decision to stay in the best position possible. When it's all said and done, you don't want to look back at your younger self and feel like you're in the back of a movie theater, yelling in vain.
Author: Nazhat Salim
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