Warning Signs of Credit Problems

The best way to handle potential credit difficulties is through prevention and quick responsive action. This creates a need to understand and recognize the warning signs of credit problems. If these warning signs begin to surface in an individual's life there are stepsthat can be taken to regain financial stability and to avoid potential pitfalls. Here are a few items that may indicate a credit problem.

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• Using one credit card to pay off another. This is a strong indicator that an individual has overextended his credit.
• Utilizing credit card cash advances to pay bills is often a sign of credit problems. The interest rates attached to these loans are quite high and this method should not be used as a regular source for obtaining funds.
• Minimum payments on your credit card should not be the norm. If you can afford to pay additional money above the minimum it is wise to do so since interest is being compounded on the balance total. If you can not afford to pay more than the minimum than this reflects a potential credit problem.
• Skipping payments on certain accounts in order to make payments on others.
• Another sign of problems is if you are consistently being assessed late fees.
• Regularly writing checks that are returned for non sufficient funds. Another warning sign of credit problems is issuing checks hoping to deposit money before they are cashed.
• Is it impossible to pay your normal monthly bills if an emergency arises? (ie.an unexpected medical bill)
• Hiding credit card bills from family members.
• Do you have multiple credit cards or lines of credit that are near or at the upper limit? This is an indicator that you may be spending at a higher level than you are earning.
• You have begun to receive letters from a lender(s) stating that your account is past due or threatening to send your account to collections.

It is important to recognize immediately if these red flags are being raised. These are warning signs of credit problems and the quicker corrective action is taken the better off you will be. Procrastinating or refusing to admit that there is a problem is almost a sure way to guarantee that you will face financial difficulty down the road.

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.