Signs That You’re Down The Bad Debt Road

Bad Credit! The sound of it makes alarms in the head go off. As long as it is in the head, it is not a cause of concern. But, if you see the signs everywhere, you must be careful and proactive. Because even before you realize it, bad credit will haunt you and your financial prospects. Let’s talk about the tell-tale signs of an approaching bad debt road you should avoid at all costs.

These signs will help you take precautionary actions and avert a major financial tragedy–a downgrade of your credit score. Once the score plummets, you are tagged as a credit risk. That has far-reaching ramifications. So, here are the signs you should watch out for:

1. Making Minimum Credit Payments
   You might like the idea of paying the minimum on the credit card bill, but you’re falling into a trap. The more minimum payments you make, the longer you stay in debt. Moreover, interests keep adding up and ultimately accumulate to the point of shock.
   Payment of the full, maximum due amount every cycle. Protect yourself from mounting interests. Automate your payments so that you don’t miss the due dates. In case you don’t have a choice but to make minimum payments for now, get a side gig to compensate for the loss of money in interest payment.

2. Your savings are dismal
   Trust me, credit can eat away your hard-earned money, the interest, to be precise. And, if you have a lot of credit bundled upon you, then you’ll start noticing shrinking savings.
   You have a life ahead, and there’s so much you need to save for. From retirement to education, you’ll have to save and invest to keep money growing. But, if all you have is your savings declining while credit increasing, then you’re slipping into a dangerous territory.

3. Frequent Credit Card Cash Advances
   You’ll often hear people warn you about withdrawing cash from your credit card account. And they are right when they warn you. Credit card cash advances are outright awful! Unless there is an emergency of the most extreme kind, you must avoid such withdrawals.
   See, the problem is these advances come with a hefty upfront fee. And even if the fee problem is solved, you’ll have to be wary of the exorbitant interest on any unpaid balance. Avoid the temptation as much as you can, or you’ll sink deep into the debt hole.

4. Huge monthly payments
   Tracking credit is of fundamental importance. If you have debts all over the play, add up the amounts and see how much is going out regularly.
   Spending more than 15-20 percent of your overall income on credit payments is a big red flag. This will leave you with little in savings and for daily expenses because an appropriate ratio needs to be arrived at for sound financial planning.

5. Banks are being cautious
   The biggest red flag is hesitation from banks. If banks are hesitating in lending out to you or putting rigorous conditions, then you are walking on thin ice.
   Your banks have access to all your credits, payment cycles, missed deadlines, and income reports. If you have excessive debt levels, they will worry whether you have the right financial health to pay up another debt in your books. Thus, keep a close watch on the credit report, identify the issues, and correct them without delay.

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