The Credit Score Scale: The Best Friend You Ever Had

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Many Americans today might prefer not to think about the credit score scale, or their position on that scale. Hard economic times may have contributed to a certain amount of backward slippage along that scale, especially for those who have not monitored it wisely. Indeed, many may have lost the good credit position they at one time enjoyed. The truth of the matter is, however, that most people who attain good credit scores usually keep them, no matter how hard the times may be. For having a good credit score is a reflection on whether or not an individual has control over their financial situation, or understands how to keep their finances in order. Someone who is financially savvy has made accommodations for the rainy days and should not have to be concerned with whether or not the market has fallen.

Unfortunately, many people have not made use of the credit score scale as a guideline for keeping themselves in check financially. In fact, many repress the very idea of keeping the number ever-present, for that number would remind them constantly that they have too many credit cards and that their debt-to-income ratio is sky-high. For those in denial, the credit score scale is a constant reminder that they are living far above their means and that the emergency fund started ten years prior has a negative balance. The more the rating slips, the less the folks in denial want to deal with the problem, until it is too late. The banks will no longer lend to someone who has constantly paid off debt with debt, or submitted payments late. Once the negative patterns are established, good job offers stop coming in and the downward spiral takes over.

Whatever your particular situation may be, the first step in the road to financial recovery is actually knowing what that score is and monitoring it constantly. The next step is changing your lifestyle completely: Destroy all but the three credit cards with the lowest rates; pay off debts, one card at a time; and do not use the cards again. Monitor every penny spent, eliminating all luxuries and non-essentials. Find a way to eliminate several hundred dollars of expense each month and then re-allocate it as follows: a term-life insurance policy that would protect your loved ones and dependents; the building of an emergency fund in the form of a money market fund (to at least five times the monthly salary); one hundred dollars for investments in a mutual fund; and the rest for paying off debt. Of course, having a financial advisor helps tremendously in the climb back to financial solvency. But for the most part, it is up to you and your determination.

Remember, your financial health is reflected in your credit score, and your ability to borrow money and land an excellent new job may depend upon it. It is far more important to your status than your wardrobe, or the car you drive, or the house you live in. Live by the credit score scale and let it serve you well, as it will, if you simply heed its warnings.

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