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Understanding Credit

Are You Prepared to Take a Credit Hit?

DIVORCE- No one enters into marriage thinking it will end in divorce. Statistics show that in the United States, 50% of marriages do end this way. When a couple decides it is best to part ways, they rarely think how the split might affect their financial and credit situation. With simple planning, a couple could shore up their financial future. Decide who will pay what bills and notify creditors of who is financially responsible for the account may save some future headaches. Not all divorces are amicable. If this is the case you might consider a security freeze with the credit bureaus. Remember; your ex-spouse has all the information they need to open new accounts that may ruin your credit in the future. If your spouse has account privileges on your credit accounts, consider contacting those creditors to establish new accounts. It would also be prudent to close any joint accounts that you are no longer using. These few steps may secure your accounts against fraudulent use by an ex-spouse.

LOSS OF INCOME-Losing your job or main source of income can be devastating not only financially but emotionally. When you can’t pay your bills, major credit problems are right around the corner. Some people will try to live off of their credit cards until they are employed again, but this can backfire and should not be you’re only plan. Have emergency savings or a “rainy day” fund, enough to cover your living expenses for at least 2 or 3 months. This is the best strategy to avoid financial and credit ruin. Writing or calling your creditors to let them know of your situation is the first thing you should do if you find you are unable to pay your bills on time. Most creditors are willing to defer or reduce payments until you are on your feet again. Working with your creditors is always better than waiting until bills go into collections and spoil your credit.

MEDICAL CRISIS-The health insurance crisis in our country seems to grow larger each and every day. As the crisis expands, more Americans are without medical insurance. The potential for unpaid medical expenses grows for each person without health benefits. One trip to the emergency room has the potential to wipe out the financial security of most people, and bad credit is certain to follow. Unfortunately the only way to avoid this is to have health insurance or some type of medical savings plan. If your employer does not provide health insurance as a benefit, you should try to seek out affordable health care elsewhere. This is even more important if you have children. Look in your local yellow pages or internet search for health insurance offered to individuals and families. Inquire about group insurance that might be available from your child’s school or church. Some Credit Unions offer discounts on group health insurance or you may be eligible for some type of government assistance.

The time to plan for these unseen circumstances is now. You may not be able to avoid these three circumstances, but with proper planning you will make it through the difficult times and still have your financial and credit health intact.

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