Bad Advice About Credit

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During my late nights working on the more detailed parts of our Christmas Parade float I had the television on to keep me company. I was amazed at the message of some commercials that promoted the idea of repairing your poor credit by purchasing and financing a new car. Effectively they said the answer to all your credit dilemmas is to borrow more money! This could not be farther from the truth. The truth is that such offers typically charge exorbitant rates of interest, which only further the problem.

Consider what an unusually high interest rate does to a car loan. First, it makes the monthly payment higher than it should be which can hinder one’s ability to payoff other obligations. Secondly, car values depreciate faster than just about anything. When most of your car payment goes to the interest due on the loan, the value of the car ends up being much less than the amount owed against the loan. This makes it very difficult to ever sell or trade in the car until the loan is paid off. If the car is totaled there can be issues with the insurance paying off the entire loan balance because they will usually only pay claims up to the value of the car.

The best way to improve credit is not to borrow more money. If you want to better your credit here's a basic list of things to do. First get a copy of your credit report and take inventory of what's on it. If anything appears erroneous follow the steps to dispute those items. Once you know exactly what you owe you can begin to formulate a plan (aka budget) to start setting money aside in savings for the purpose of paying off the legitimate debts that are hurting your credit. Slow and steady wins this race. Careful planning, patience and diligence with regard to your finances will have you on the path to a good credit record.

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