Anyone can have bad credit.  Rich or poor, young or old. If you don’t believe this, that might already be a problem.

Bad credit usually starts from small things which when neglected, can result to a serious debt problem. Know the warning signs of bad credit and take the necessary actions before it’s too late.

Here are the top 10 signs of bad credit:

1) You don’t save for the rainy day. Face it, financial crisis can come at the most unexpected times and if you don’t have your own savings to lean on, you could be in big trouble. Financial experts advise that everyone should have his own personal fund which can support you for at least six months without your income.

If you are the bread winner in the family, you should make sure that you have enough savings to support you and your family in case you’re unable to work. Saving for the rainy day is crucial since debts can easily add up if in case you temporarily lose your source of income.

2) Using your credit cards for most expenses. In most cases, the reason why people create bad debt problems is because of incorrect use of credit cards. Because credit cards are a convenient way to shop, most people do not realize the danger of using credit cards for most of their expenses. If you’re in the habit of using your credit card to buy that “gorgeous” dress on sale, or for dining out with your friends on a Friday night, you could be heading toward bad credit. It’s about time you put a check on your spending.  If you are going to use your credit card constantly, make sure you are paying off the credit card (ideally) or paying MUCH MORE THAN THE MINIMUM REQUIRED

3) Most of your income goes to debt payments. If a huge part of your salary is used for paying debts, perhaps you’ve been incurring more debts that you can handle. For instance, how many credit cards do you own? Is it possible for you to give up some of your credit cards so you can focus on paying only two or three at most? Perhaps you’ve been spending way beyond your means. To see more clearly, make list of all (yes, even the littlest expenses) your spending for the entire month and compare the sum to your monthly income. Are you spending more than what your budget allows? If yes, then you should work out on a budget plan to minimize your expenses and pay off your debts.

4) You’ve used up or is approaching your maximum credit. Financial experts recommend that everyone should not go beyond 50% of their allotted credit. If you’re nearing your credit limit or if you have been penalized because of exceeding your credit limit, your credit score has definitely been lowered. For your information, maxing out your credit cards has a very negative impact on your credit standing.

5) You are not aware of exactly how much you owe all your creditors. This is a major red flag. As a borrower, you should always be aware of the exact amounts of debt you owe to each of your creditors. You should know the exact due dates of payment for each of your debts. If your debts are starting to confuse you, you should definitely be alarmed and starting treating your debts more seriously.

6) You don’t have a health insurance. Medical bills can instantly put you in a bad credit situation. We all know that sickness in the family may come at any time and if you don’t have a health insurance to back you up, you’ll be in big trouble. Without a medical insurance, you might be forced to use your credit card, get a home equity loan or other high-interest loan just to get through an emergency situation. Thus, having a medical insurance gives you a support system in case you need it.

7) You have been rejected by a creditor. If you’ve been denied credit, there maybe a serious problem with your credit standing. Check your credit history and see if there are any errors or misinformation in your report that have caused your creditor to refuse you. Some people are not aware that they’ve already been a victim of credit card fraud or identity theft until a creditor denied their application. If you see any errors or fraudulent charges in your account, inform your creditors and the three major credit bureaus (Equifax, Experian, TransUnion) immediately.

8) Your creditors are starting to call you. If you’re starting to get calls from your creditors reminding you of your debt, it’s a very obvious sign that you have a bad debt problem. Perhaps you’ve already missed several payments or it’s also possible that some scammers have been illegally using your account. In any case, if your creditors are trying to contact you, it’s best to talk to them and clear up the situation rather than hide and ignore their calls.

9) You borrow money to pay off your debts.Trying to borrow money to pay off your past due debt to other creditors can be a very risky move.First of all, you could be forced to take a loan with a high rate of interest just to pay off another creditor.If you’re unable to keep up with your debts with your own income, then you might already be stuck in a serious debt problem.

10) You’re starting to get into arguments with your family. Getting into an argument because of debt is a very clear warning sign of unhealthy money-management. If money issues are starting to get in the way of your family relationship, perhaps you should seek help from a legitimate credit counselor who can help you handle your finances more efficiently.

Allison May is a credit consultant and a writer for Credit Creators. The resource provides consumers with valuable advice and information on credit cards for bad credit,credit cards for good credit and other credit-related issues. Its main objective is to help people build good credit. Copyright © 2008

By Allison May

Allison May is a credit consultant and a writer for Credit Creators. The resource provides consumers with valuable advice and information on Guaranteed Approval credit cards, Unsecured credit cards for Bad Credit and other credit-related issues. The main objective here is to help people build good credit. Add Allison on

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