Managing your debt and credit
Whether it is debt from student loans, a mortgage, or credit cards, it is important to avoid the financial pitfalls that can sometimes go hand in hand with borrowing. Any sound financial plan should effectively manage both debt and credit. The following are some tips to help you manage your debt/credit:
- Make sure that you know exactly how much you owe by keeping track of balances and interest rates
- Develop a short-term plan to manage your payments and avoid late fees
- Optimize your repayments by paying off high-interest debt first or take advantage of debt consolidation/refinancing
Understanding what’s on your credit report
An important part of managing debt and credit is to understand the information contained in your credit report. Not only does a credit report contain information about past and present credit transactions, but it is also used by potential lenders to evaluate your creditworthiness.
What information are lenders typically looking for in a credit report? For the most part, a lender will assume that you can be trusted to make timely monthly payments against your debts in the future if you have always done so in the past. As a result, a history of late payments or bad debts will hurt your credit. Based on your track record, if your credit report indicates that you are a poor risk, a new lender is likely to turn you down for credit or extend it to you at a higher interest rate. In addition, too many inquiries on your credit report in a short time period can make lenders suspicious.
Today, good credit is even sometimes viewed by potential employers as a prerequisite for employment–something to think about if you’re in the market for a new job or plan on changing jobs in the near future.
Because a credit report affects so many different aspects of one’s financial situation, it’s important to establish and maintain a good credit history in your own name. You should review your credit report regularly and be sure to correct any errors on it. You’re entitled to a free copy of your credit report from each of the three major credit reporting agencies once every 12 months. You can go to www.annualcreditreport.com for more information.
Working with a financial professional
Although you can certainly do it alone, you may find it helpful to work with a financial professional to assist you in creating and implementing a financial plan.
A financial professional can help you accomplish the following:
- Determine the state of your current affairs by reviewing income, assets, and liabilities
- Develop a plan and help you identify your financial goals
- Make recommendations about specific products/services
- Monitor your plan
- Adjust your plan as needed
Tip: Keep in mind that unless you authorize a financial professional to make investment choices for you, a financial professional is solely there to make financial recommendations to you. Ultimately, you have responsibility for your finances and the decisions surrounding them.
Contact a Horizon to start working with a financial advisor by calling 888-904-2265 or visit us on the web at www.accesshorizon.com