Does knowing the mistakes that most often lead to these problems protect you from them? Basically, the question is this. Do smart people have credit problems?

Someone Else’s Problem

It is easy to be on the outside looking in and to point out what went wrong for those facing credit problems and mounds of debt. In fact, the causes of the situation and even ways to avoid such situations can seem painfully obvious to the average onlooker. So many people use their credit cards with wild abandon and others just live beyond their means.

If only these individuals would learn not to spend money that they do not have then their finances would never reach a state of ruin. It is too easy to be on the outside looking in and offering these simplistic explanations. There is so much more to the story.

Are Smart People More Prone To Credit Catastrophe?

There is a possibility that those who are well-versed in matters of finance and credit are even more susceptible than those who are not. Some people who know so much about financial matters somehow feel that this knowledge makes them immune to financial mishaps. Sadly, this is not the case.

Think about this scenario in another one of life’s arenas. How much do you know about healthy living? Do you know enough about proper nutrition and regular exercise to lead a lifestyle that promotes optimal health? And do you lead that lifestyle?

Just because you know how to eat in a way that is healthy that does not mean that you always avoid junk food. Just because you know how much exercise you should be getting on a weekly basis that does not mean that you exercise as often as you should. In the same way, many people know how to avoid financial credit problems.

They just don’t.

The issue is that those who know how to avoid the downfalls of poor credit usage might think themselves impervious to financial harm even though they can fall just as easily as anyone else. Knowing how to handle your finances properly is not the same as doing it.

So Why Do Otherwise Intelligent People End Up With Credit Problems?

The truth is that almost everyone understands the basics of properly managing their finances. You do not spend money that you do not have. It is as simple as that. Cash flow issues complicate matters, but it is not just those who have these issues who end up in dire straits.

There are many explanations, actually. People do not want to think about financial limitations. They do not want to face problems as long as they still have credit left. They want to maintain a lifestyle.

It is not that smart people do not have credit problems. They do. They can just explain their personal credit problems in more complex financial terms. It is not a wealth of knowledge or an extensive financial vocabulary that shields anyone from personal credit problems. It is only through doing the necessary budgeting and money management that anyone maintains a bright financial picture. Now that’s smart.

While you surely have heard enough advice from people about how to make it through, you can never have too many helpful tidbits to brighten your financial picture. These nuggets are useful at any time, but right now they are essential.

Use Extra Money Wisely

You may think that this is absurd. If you had extra money then this wouldn’t be much of a recession. Still, extra money comes in sometimes in the form of tax refunds, bonuses, inheritance money, and whatnot.

You may be tempted to think of this as free money to spend on frivolous pursuits, but think again. This is the perfect time to put this money toward your debt. This is absolutely the best use of this money if you are in debt. It will save you money in the long run.

If you are lucky enough to not be in debt then you would be wise to put the money into a savings account to start gaining some interest. Recessions are a time to be prudent and to be prepared to ride out the hard times until they pass. They will pass. You just need to be even more careful that usual with your money until then.

Never Forget Coupons

It may seem like the time for clipping coupons has come and gone, but here’s the truth. As long as coupons can help you save money then they are still relevant and valuable money saving tools. Coupons may only save a little bit at a time, but if you faithfully clip your coupons week after week then you will find that the savings start to add up like you never expected.

All the extra dollars that you save from using coupons every time you go shopping can be put toward your debt reduction efforts. You may still be unsure that clipping coupons is worth it. You may even be unimpressed. The question is clear. Could you use more money?

Avoid Co-Signing

This may sound harsh but in times like these you want to avoid co-signing for other people. Odds are you are having enough challenges of your own on the financial front so you do not want to risk adding someone else’s problems to your own. It is possible that everything will work out fine, but with the uncertainty that is the hallmark of economic periods like this the chances are too great that something will go wrong. You do not want to make any moves that could add to your personal debt or harm your credit score. Skip the co-signing until things on the financial front are a little more stable.

These tips for living in a recession are just good advice. When you put extra money to good use, remember that a penny saved is a penny earned, and avoid moves that could be risky for your financial outlook then you will not just live in the recession. You will live through it.

However, for as much as a boon your credit score can be when applying for loans, getting insurance, obtaining a bank account, or even getting a home or apartment, this score can also be a bane, negatively impacted your ability to obtain the aforementioned goods and services, or can even prevent acquiring them outrightly. It all depends on the value of your score and the information that has accumulated on your report.

Although building your credit score takes time and patience, there are plenty of things you can do to reduce it or even ruin it outrightly. As an extreme example, filing bankruptcy can completely replace your score with a terrible mark that ruins your reputation with financial businesses and other companies, but that’s a drastic measure meant for exceptional cases and not at all something you should let happen to yourself.

The first and most important thing that negatively affects your credit score is making late payments. In fact, around 35% of the information that applies to your credit score is directly tied to the payments you make. If you make late payments consistently and over a long period of time, it will show on your credit by reducing your score.

Of course, paying late is better than not paying at all, and if you end up making the choice to do the latter, than it will reflect worse on your credit score. Whether it be a credit card payment or a utility bill, for every month that you miss making the payment, you’re brought that much closer to having your outstanding balance charged off, which is one of the worst things that can happen in regards to your credit score.

If you end up neglecting payments for an exceptional amount of time, you can risk having your bills sent to a collections agency. This is really bad, as a collections status on a payment shows that a creditor decided to give up trying to get you to pay and has employed a third party to do it on their behalf.

Another thing you can do to adversely affect your credit is to default on a loan. When you do this, it shows on your credit that you have decided to not uphold your end of a loan contract and instead refused to pay the amount you owe back for whatever reason, and this is definitely one of the more terrible things that can end up on a report.

Of course, these things can be easily avoided if you apply a little prudence and some foresight when it comes to managing your personal finances. There’s not a lot to consider when it comes to making your money work for you and to prevent a credit disaster. Just spend less than what you make, and you’re golden. Of course, it’s easier said than done, but just consider what you really need and whether or not you’re being financially conservative.

Credit score ratings come from the three credit reporting agencies, Experian, Equifax, and Trans Union, the same agencies where you get your credit report. These agencies have a special type of software that takes the information from your credit report and compiles a score from it. This is called a FICO score.

The software uses several different types of information from your credit report in order to figure out what your FICO score is. The names and addresses of your creditors, the total amount of money you owe to all of your creditors, and your payment history with all of them are all what makes your score a good one or a bad one.

A FICO score is used by any business establishment where you might apply for credit, so it is useful to know what your score is before you apply. FICO scores range from 300, which is not good, to 850, which is very good. Each credit agency might give you a different score, so check with all three to get a good idea of exactly what your score is.  You can get a free credit report online, but they are most definitely free! You do not have to sign up for any type of service to get a free credit report. You can get one free credit report from each of the three credit reporting agencies once a year.

All of those commercials who tell you how important your credit score rating is are very correct.  Most people know that their credit is going to be checked when they apply for a credit card, an automobile loan, or a mortgage. Those are the three “big ones”, and a low credit score will cause you to pay a high interest rate.

Automobile loans and home mortgages may require you to get a co-signer.

Your credit score ratings can also influence other things that are important to you. If you are looking for a new job, your potential employer could well check your credit rating before hiring you, especially if the job is one where you handle money. Landlords will check these scores to try to weed out undesirable tenants. You can still rent with bad credit, but you may be asked to pay a big deposit. The utility services for your home such as water, electricity, and gas may also charge a large deposit to someone with a low credit score who needs these utilities turned on at a new address.

Your home and auto insurance companies also take the time to check your credit score ratings. A low rating may well cause your premiums to be higher. Even your cell phone service can be affected by a low credit rating. If you have poor credit, you’ll pay more for your cell phone service.

Take care of your credit score rating, for it can make the difference between being able to purchase goods and services and having to pay a premium price for them – or perhaps not getting them at all.

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A high credit score means that your payments on your credit cards, car, mortgage, insurance, and even your cell phone will be lower. With a high credit score, you don’t have to worry about paying a deposit for utilities like electricity, gas, water, telephones and the like. You also don’t have to worry about not being approved to rent that apartment or home with a good credit score. Landlords will check your credit score before renting to you to insure that you are conscientious enough to pay your rent on time. They figure that if you pay your bills late, your rent will be late, too.

More and more employers are performing credit checks on each applicant they get for a job, especially in the retail sector where you will be handling money. You will know that your credit is going to be checked when you apply for the job, as you will have to sign a form that gives your consent before the employer can proceed. Many a person who was well qualified for the job and thought they had it “in the bag” has been dismayed to find out that bad credit kept them from being hired.

It’s a good idea to check your credit report once a year in order to keep on top of your credit score. Most people have a pretty good idea of their credit standing and also how much money they owe to creditors, but your credit report will list everything that has been done in your name, and could help you to deter identity theft. There could also be other mistakes on your report that need to be corrected.

You can get a free copy of your credit report once per year from each of the three credit reporting companies.