As an immigrant, when I came to the
US many years ago, I had no credit history. But I have savings--dollar savings
from a job I did in Asia for Americans and got paid in dollars.
No one would give me credit. No
credit card company would touch me, even though I had a steady job, no debt and
a nice sum in savings account. So I had to go to a store, buy 8 chairs which
cost me $225, and put it on store revolver, and pay it off over time---the
kindly store clerk said to not pay it off until a year, so my "credit
history" would be built up.
Things are no different. Credit is
literally given to people who cannot afford it. So what has that to do with
Payday loans? Simply this. You are well advised to use credit or borrowing
very, very carefully specially if it comes at a high cost. Here are some tips
on how to manage your borrowing cost.
1. Check your credit score. If it is
low (under 680) find out why. Did you neglect to pay your bills on time? Do you
have too much debt? Are you applying for too many credit lines and cards? All
of this will depress your score and force you to pay more for your loans.
2. Get into a "Saving" vs.
"Spending" habit. Watch those dollars, even ones and twos. If your
savings rate is less than 10% of your income, you are heading for trouble.
3. Cancel all but the necessary
credit cards. Credit cad companies will scare you by saying cancelling your
card will negatively impact your score. It may, in the short run (3-6 months)
but your score will be much more depressed if you carry too many cards. You
see, each card comes with a limit. That limit is called "debt" even
if not used. Having too many cards also tempts you to use them. And having that
many cards means someone is checking your credit--each credit enquiry, other
than by yourself, add a negative to your credit score.
4. Avoid bankruptcy like the plague.
It is truly another dungeon that it takes you seven years of perfect behavior
(longer in some states) to get out of it from reporting perspective. The only
exception is if you have had a catastrophic event that has caused a debt
pile-up, like a medical emergency, or uninsured damages to your home. Even
then, with good financial counseling you may be able to avoid bankruptcy and
work out payment terms with your creditors.
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