It seems as though the year 2020 has not brought a lot of good for the people in Florida, or anywhere else in the country. However, a new study has shown that there is some positive news. According to WalletHub.com, American consumers paid off $118 billion in credit card debt during the first half of the year. That may seem impossible during the COVID-19 crisis, or at any other time period in history. In fact, this figure is a record that has never been set before in the nation. The increase is being attributed to a reduction in credit card debt, more austerity being practiced in households, and the stimulus checks issued by the government in the early days of the pandemic.
Again, the news is good for borrowers who have had trouble finding anything good to come out of the pandemic. At this time, it is important to be able to continue focusing on the positive and to avoid the most common mistakes people make after becoming debt-free.
Getting Back Into Debt
People fall back into debt after finally getting rid of it for a number of reasons. One is that they still have too many expenses and their income does not fully cover it, so they have to rely on their credit cards. Others have simply felt deprived of buying the things they love, so they go on a spending spree with little regard to how much they are spending and how much they will have to pay back.
It is essential that you cut back on spending and that you absolutely do not buy things you cannot afford. If you have to buy something using a credit card, make sure you can pay off the balance in full when the bill comes at the end of the month. Any time you are tempted to make a purchase, do not only ask yourself if you can afford it, but also remind yourself of the past few months or even years. Getting out of debt is very challenging and few people want to do it more than once. Remember the challenging times, and you will likely be less tempted to get back into that situation again.
Closing Your Credit Card Accounts
The idea that closing your credit card accounts will help you avoid falling back into debt is one that is filled with good intentions. Unfortunately, it is a move that could hurt you more than keeping them open.
Even if you are not thinking about it right now, there is a chance that at some point, you may want to buy a home, take out a car loan, or apply for another type of loan. To do this, you will need a good credit history, as it is one of the determining factors in whether or not a lender will give you a loan. Closing your credit card accounts will only hurt your credit score.
Lenders prefer to give loans to people who have a long borrowing history. If you close the account, it will fall off of your credit report and lenders will be unable to see it and it will not count towards your borrowing history. When you really do not want to use the card, but you also know it is usually not worthwhile to close the account, shred the cards instead with a pair of scissors but keep the account open. This will prevent you from leaning on the card too much, but will also keep the account, and its good standing, on your credit card.
Still, often it is a better idea to move away from the idea of not using cards at all and instead move towards the idea of using the card more wisely. Many credit cards have an annual fee attached to them and if you cut up the card and cannot use it, you are still responsible for paying the annual fee. Also, if your card goes unused for too long, there is a good possibility that the creditor will close the account.
If you have confidence in your new spending habits, keep the card and use it for small purchases, such as groceries or one tank of gas, and pay off the balance every month. This will show future lenders that you are not a borrowing risk, and that you will likely pay off any debt you take on with them.
Failing to Establish New Financial Goals
Many people work so long to get out of debt that they start to think that is the only financial goal a person could have. Truthfully though, one of the reasons you went into debt is likely because you did not have financial goals. If you do not make any new ones after you get out of debt, you may find yourself in that position again. Now is the time to start investing in retirement savings, creating an emergency fund, and start putting money away for your child’s tuition or any other large financial goals you have been dreaming of while paying off your debt.
Failing to Check Your Credit Report
If you did not check your credit report with one of the major bureaus while you were paying off your debt, it is critical that you do it now. Obtain a free credit report from TransUnion, Experian, and Equifax every year and carefully review it. This is the only way to know if old debts are still showing up, if the report contains debt that is not yours, or if it contains any other errors. These mistakes will not only lower your overall credit score, but they can also indicate that something more serious has occurred, such as identity theft.
Our Florida Debt Defense Attorneys can Help with Legal Actions
Getting out of debt is a great feeling but unfortunately, it is one that many still have not yet experienced. If you are suffering from debt and a collector has taken legal action against you, our Fort Lauderdale debt defense attorneys can help. At Loan Lawyers, we know the many defenses available in these lawsuits and will use them to give you the best chance of success.
Call us today at (954) 807-1361 or contact us online to schedule a free consultation and get the sound legal advice you need.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations.
Contact the debt defense team at Loan Lawyers for a free consultation and find out more about our money-back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.