There is having too much debt and then there’s being in debt hell. As the following video suggests if you’re so far in debt that you’re receiving phone calls from your creditors or, worse yet, from debt collectors we don’t have to tell you that you have too much debt.
If you treat it sensibly
As you learned from this video having some debt is not necessarily a bad thing so long as you treat it sensibly. Even though you may not have thought of it this way one form of debt is when you use a credit card. If you charge $450 on a credit card for a new set of tires you’ve just borrowed money from the credit card issuer and so now have a debt. If you pay off that $450 at the end of the month then poof! Your debt vanishes. That would be treating it sensibly.
The warning signs of too much debt
But if you’re carrying some debt and are not sure if you have too much of it there are some warning signs you need to be aware of.
Number one is do you see your balances growing every month? If so, it’s because you’re not paying off your balances at the end of every month so that your interest charges just keep piling up. This will also happen if you make just the minimum payments each month.
Do your payments total up to more than your rent or house payment? This is a sure sign that you have too much debt. The best thing you could do at this point is focus your energy on getting those debt payments paid down if not paid off.
How’s your credit score?
Are you monitoring your credit score? If not, you certainly should be. The three credit reporting bureaus – TransUnion, Experian and Equifax – will give you your credit score free although you may have to do a bunch of stuff to get it. You can also get it free on the sites CreditKarma and CreditSesame. Unfortunately, none of these can provide your true FICO score, which is the credit score used by virtually all the major lenders. If you want it you’ll have to go to www.myfico.com and pay for it.
The likely culprit
If you see your credit score has been going down it’s probably due to what’s called your credit utilization ratio. This accounts for 30% of your credit score and is the total amount of debt you have divided by the total amount of credit you have available. For example, if you have $10,000 in total credit available but have used up $5000 of it, your credit utilization ratio would be 50%, which is much too high. Since this makes up 30% of your credit score you need to get to work and pay down some of your balances.
Another thing that could be dragging down your credit score is if you’ve been applying for a lot of different types of credit recently. Every time you apply for any type of credit it’s called a “hard inquiry” and will reduce your credit score by anywhere from 2 to 5 points. So if you recently applied for, say, three new credit cards and a department store card your credit score could have been dinged by eight or even by as much as 20 points.
If you’re shocked
If you total up your debts and are shocked by the results you most certainly have too much debt.
And finally, if you’ve been turned down for a loan or credit card that’s the world telling you that you have too much debt.
So what can you do if you have too much debt? If you’re drowning in credit card debt and high interest charges, visit www.nationaldebtrelief.com to learn how to reduce your credit card debt without bankruptcy. The secret is a strategy called debt settlement. National Debt Relief has used it to settle the debts of more than 100,000 individuals and families and saved them more than $1 billion in the process.