Portfolio Investment Financial

What Is Most Damaging To Your Credit?

In hard economic times, it can be difficult not to rely on credit for monthly expenses. It is important to be careful about how you handle your credit so that you avoid lowering your credit score. Here are some of the common mistakes that can do the most harm to your credit.

Transferring Credit Balances
While a credit card with a lower interest rate may be attractive when you have a high credit balance, transferring your balance can damage your credit. Closing your old credit account after you transfer your balance can also negatively impact your score, especially if it was a card with a high limit. The gap between your credit balance and your credit limit is called the "credit utilization ratio. The closer you are to having a maxed out line of credit, the higher this ratio will be. Having a high credit utilization ratio will damage your credit.

Applying for Several New Cards or Loans
Applying for multiple lines of credit, including credit cards and loans, in a short amount of time can damage your credit. About 10 percent of your credit score is based on new credit inquiries, and applying for several new accounts within a short period of time will cause your credit score to drop.

Paying Late
Making late payments is the mistake that can do the most damage to your credit. Late payments are particularly harmful to a credit score because payment history accounts for 35 percent of the score. In addition, being 6 months late on your payments gives creditors the option to charge off your debt. When your credit card is charged off, your account is closed and sent to a collections agency. Although your account is closed, the charge-off will still have a significant negative impact on your credit.  Additionally, your credit utilization ratio is bound to increase, further damaging your score.

Responsibly maintaining your lines of credit will help you keep your debt under control and achieve a high credit score. With a great score, you can save money in the future by securing lower interest rates as you apply for new credit cards or loans.

Building Your Budget And Demolishing Your Debt

If you find yourself with a large amount of debt, then building a budget can help you eliminate it over time. By reversing your debt with a well-planned budget, you will improve your credit score and get your finances back on track.

Total Your Income and Expenses
The first steps of creating a budget are to add up all of your sources of income and subtract from them your total expenses to determine your net income. Remember to include all reliable sources of income, including alimony. If you have an income that fluctuates, then use your average monthly income. It is also important to include all expenses, including those that are fixed and those that vary, when calculating your net income. When adding up expenses that vary each month, such as groceries or electricity, use the maximum amount that you may have to spend.

Adjust Your Spending
After you have found your net income, look carefully at your spending to find areas in which you can cut back. By trimming unnecessary expenses, you will have money left over that can be used to pay off debt. The more money you put towards decreasing your debt each month, the less interest you will end up paying.

Save For An Emergency
It is important to put money aside in a savings account as you pay off debt in case your income is suddenly decreased or you find yourself hit with unforeseen expenses. Set aside a small portion of monthly income to an emergency savings fund in order to budget for the unpredictable. Try to maintain money to see you through 3 months with no other income. After you have enough money set aside, channel the portion of your income that you had been saving towards debt payments.

Creating a budget allows you to reverse your debt as you pay monthly expenses and save for the future. After your debt has been eliminated, you can build a new budget that will allow you to maintain control over your finances.

Debt Resources From Portfolio Investment Financial

Are you interested in accessing your credit score? Do you want more tips for cutting expenses? You can find more information on these topics by visiting the following websites.

• Learn more about accessing your credit score on this page from the Federal Trade Commission.
• Read more about the importance of maintaining a good credit report on this page from MoneyCentral.MSN.com.
• Get more information on how to find your personal credit score by visiting this page from AnnualCreditReport.com.
• You’ll find more helpful finance tips to cut down on expenses on this page from About.com.
• Take a look at the advice for cutting down on expenses on this page from eHow.com.

WATCH: How To Create A Budget

Creating a budget is the best way to keep track of your finances and reach any goals you may have set for yourself. A budget can also help you stay on track of paying off debts. In this video, you’ll get some great tips for creating a budget that works for your lifestyle.

The first step in creating a budget is setting a goal. This can be a future goal, like buying a house or setting up a college fund for your children. You’ll also want one place to keep track of all of your spending habits so you can see just where your money is going.

By creating a budget, you’ll be able to get a better understanding of your finances and save money for the future.

Cutting Expenses? Follow These Simple Steps

It can be challenging to work on paying off your debt if your regular expenses require all or most of your income. That’s why it’s important for all families and individuals to learn how best to handle their finances. These 4 tips can help you cut expenses in your life, so you can devote more money toward paying off your debt:

Drive less. For many families, rising gas prices continue to add to regular monthly expenses. While some environments and jobs require you to drive, there are plenty of ways to cut down on your driving and gas expenses. Think about the places you go most often and then determine how many of them are within walking distance from your home. If this isn’t possible, then you can also save money by carpooling. Share rides with family members or friends that live close by.

Cook more. Going out to eat can be a great way to celebrate special occasions, but the costs of going out can quickly add up when it becomes a regular occurrence. You can save a lot of money each month by preparing and eating more of your meals at home instead of going to restaurants, cafes, and other eateries. By buying larger quantities at the grocery store, you’ll be able to make more meals for less money.

Figure out your phone situation. If your family members all have cell phones, then you can cut expenses by getting rid of your landline. You can also shop around for the best cell phone plans. Today’s providers compete to provide the best deals, meaning you can find the right price!

Prioritize home expenses. When it comes to your utilities, there are a few items you can cut back on to save money. Items like cable TV and internet can both be downgraded. You’ll still have access to your favorite shows and websites, but you won’t be paying extra for the features you don’t use.

By cutting down and setting a budget, you’ll be able to save more money that can be used toward debt payments. This will help you create a more manageable financial situation.