People respond to debt in one of two ways. Some are overwhelmed by it. Others are slightly uneasy and worry that they are in too deep. Most people, in fact over 40 million Americans, fall into these categories; and while credit offers wonderful opportunities to improve a person's material standard of living, unless used wisely, it is easy to fall into the nightmare of unpaid bills, overdue notices, collection agency letters, negative credit reports and even bankruptcy. However, it is possible to set up a credit repair system that allows an individual to get out of debt and manage money more wisely.
The first step is to recognize there is a problem. There are a number of danger signals. Credit borrowing doesn't make much sense when installments are made on products that are quickly consumed such as food, gifts and entertainment. A person should not have to borrow to meet regular expenses such as rent and utility bills. There is also a problem if an individual can barely make the minimum required payment on bills, but continues to charge.
Using one credit card to pay off another is a sign of trouble. An unacceptable level of debt is using 25% or more of your take home income to pay credit card bills and other personal loans. Problems can occur when credit cards are charged to the limit and checks designed to make the payments keep bouncing. The situation becomes completely out of control when a person is so far behind that collection agencies start hounding them.
The next step is to determine how large a problem exists by listing all outstanding debts you have every month. It is important to indicate to whom the debt is owed, the total amount, the monthly payment, the number of months to go and the number of months behind, to help you prioritize your debts. Usually debts which have to be paid first are utility bills such as gas, electricity, heating, oil, water or telephone, secured debts linked to specific i...