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Credit Education > Identity Theft > Doing Right Financial Advices at the Wrong Situations

Doing Right Financial Advices at the Wrong Situations

By Janet Lacey
Published: Thursday, February 4th, 2010

Indebted individuals have enough problems that they need to deal with in the first place. Being too indebted can lead to a financial disaster with no available repairs. Just after the recession a huge number of indebted individuals were forced to declare bankruptcy. And there are even worse situations where the indebted individuals were left with no choice but to commit identity theft just have a shot in repairing their credit and becoming credit worthy again.

There are a lot of existing professionals both individuals and companies that claim to be able to give credit repairing services. Unfortunately, these advices do not universally apply to everyone. There are indebted individuals with cases that cannot be repaired through these common advices. The worst part of this dilemma is that there are even cases where the indebted individual is making himself or herself more credit unworthy by misinterpreting some of these credit repair advices.

Some crediting and financing companies ask their borrowers to lower their credit limit in their existing revolving accounts. If a borrower is asked to do so, he or she does not have much choice but to do so, on the other hand there are indebted individuals who ask their current creditor to lower their credit limit even if they are not asked to do so. When this happens the indebted individual is lowering the gap between his or her available balance and current balance. Failing to maintain this debt-balance ratio to at most at 50% will result to bad credit score and worsen report.

Indebted individuals have the tendency to make late payments because of debt prioritization. Ironically, late payments have more impact to good payers as compared to those who are committing this is a regular basis. A credit account holder with a 700+ score will have to endure a massive 100 point lowering if he or she paid a bill late. On the other hand, those who regularly paid their bills late will only have to endure less impact like a few two digit decreases. Managing debts through bill prioritization is a good damage control, but knowing when and where to do so is the vital part of the process.

Debt consolidation can also prove to be troublesome for indebted individuals. Applying for new credit accounts like a new card will post negative information on the credit report of the individual. The same is true with consolidating credit accounts. Those who opted to consolidate too much of their debts may end up with a lump sum of their debts which is faster in maturing through its interest rates.

There are indebted individual that take debt consolidation and the maintenance of their debt- balance ration to extreme financial strategies, like regularly opening accounts given that he or she already have plenty of it to start with. In doing so, the debt- balance ratio of the individual is lowered, but maintaining a lot of accounts will prove harder to do in the long run. Consolidating debts by transferring old balances to new accounts with lower introductory rates can compromise the indebted individual by making their balances shoot off after the introductory low rates have been replaced with regular rates.

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