It's easy to fall into debt—especially if you are supporting a growing family. But just because you're in debt now doesn't mean you have to stay in debt. You are taking the first step to dig yourself out of debt by reading this article. Whether you're in serious trouble or just want to pay down some bills, take the following steps to get going.
It's hard to imagine functioning in modern life without a credit card. Renting a car, reserving a hotel room or shopping online would all be much more difficult without plastic. But credit cards can also get you into trouble. It is very easy to overspend and find yourself in an extraordinary amount of debt.
Your credit score is a three-digit number that can have a big impact on your finances. It tells creditors how likely you are to pay back the money you want to borrow. The lower your credit score, the riskier you appear to lenders, and the more you will likely pay for loans, credit cards and insurance premiums. Credit scores are also used more and more by potential employers, landlords, utility companies and others. If your credit score looks bad, you look bad.
Your credit score, the three-digit number that follows you around for life, requires your supreme care. The amount you pay for credit and insurance premiums; and whether you are offered a job, approved to live in an apartment, or get utilities turned on in a new residence can be governed by your credit score. Thinking like a creditor and knowing what affects your score will help you improve your financial well-being.
Choosing a credit card is a very personal decision—the card that's best for you might be very different from the best card for someone else. Avoid making a big mistake when choosing a credit card. Don't pick a card simply because it's the one your bank or credit union offers or because it comes with a super-low introductory rate or attractive rewards or because it showed up in your mailbox "pre-approved."
Before you can buy a house, you will need to shop for—and qualify for—a home loan. A mortgage will likely be the biggest amount you ever borrow, and could take 15 to 30 years to pay back. That makes shopping for the lowest interest rate and fees even more important. A small difference in interest rates could save you hundreds of dollars every month, or thousands of dollars over the life of the loan. But to qualify for the lowest rates, you'll need to prepare yourself financially.
People tend to spend a lot of time shopping around for a car, and very little time shopping for a car loan. Keep yourself in the driver's seat when you walk into that showroom. Know how much car you can afford and shop for the best rates and terms available to you before the negotiations begin.
A payday loan—which might also be called a "cash advance" or "check loan"—is a short-term loan, generally for $500 or less, that is typically due on your next payday. Many borrowers wind up pay interest rates of 400% or more, and remain indebted to the lender for half a year or more. Using a payday lender is like borrowing from a loan shark; the lenders won’t break your bones, but they will cause pain.
The FINRA Investor Education Foundation is pleased to make FICO® credit scores—and the educational information and tools in the FICO Standard product—available free of charge to active duty service members and their spouses.
Credit cards can make it seem easy to buy things when you don’t have the cash in your pocket—or in the bank. But credit cards aren’t free money. This tutorial includes a worksheet that can help you track your use of credit and keep you aware of outstanding credit obligations.