What could possibly go wrong by taking over the family finances and digging into them to reduce massive debt and become cash flow positive (eventually)?
I ask the question knowing that it sounds rhetorical or stupid. You might say that there are no stupid questions, but I might have found the one. I’m going with rhetorical, though. Makes me feel better.
The answer to that ridiculous question is that everything can go wrong. Everything!
Well, it can’t be that bad. I’m already in massive debt…I have to play credit card roulette to find the one with available credit…I have a negative net worth…My budget looks like a financial wasteland…Seriously, how much worse could it get?
It turns out that there is one more thing I can screw up. I can destroy my credit score.
I always forget about that credit score thing. For all of our financial failings and massive debt, we have managed to have a decent credit score. I guess that means we are good at taking on debt, I don’t know.
Here are the few things I know about improving your credit score:
• Time – The longer you have an account open and prove that you can pay your debts, the more reliable you are to financial institutions. Thus the higher your credit score.
• On Time – Pay your bills on time and you are more reliable…score goes up.
• Multiple Cards – Having multiple cards with balances is worse than having one or two cards with a balance. Pay off the small balances or use one card with a balance and the score will improve.
• Credit Requests – The more requests that you make to financial institutions in succession, the more your credit gets dinged and drops your score. So keep your requests to a minimum where possible.
There are more criteria involved in your credit score and it can seem like more of an art than a science at times. I listed the few bigger ones that I’ve learned over the years.
Dropping the Financial Ball
Last month when I started this financial journey, I dug into every credit card account we have. Gaining access to each account was a daunting task, especially because my wife had setup all the accounts with her usernames, passwords, and security questions. She and I had to try and figure out all the access together.
After finally gaining access, I made the decision to pay the minimum amount owed on each credit card every month. In the chaos of that initial month, I realized that not every credit card we use allows for automatic minimum payments.
Side note: If you are a credit card company and you do not allow me to setup a monthly automatic payment, prepare to be dropped from my financial plan. Once I pay off my debt to you, don’t expect to gain another dime. Bye-bye. We are done. *End of the mini-rant.
Maybe you can see where I’m going with this, talking about dropping the ball.
In this second month of the financial journey, I have been distracted by every financial shiny object I came across. Everything from credit card deals to debt consolidation loans. That’s a bad place to be when you are trying to get finances on track.
The problem with all of the distractions is that I forgot to check all the credit card accounts this month to ensure all minimum payments were made.
Ruh roh, Raggy. Aka…Uh oh, Shaggy.
That’s my Scooby Doo voice for “we are in trouble.”
Turns out that I missed a payment on my credit cards. Ah, crap! That’s a problem. I missed a payment on one card by two days. So close, but so far away.
I’m sure that will negatively impact my credit score. But to be honest, I won’t dwell on it or really care about it. Don’t get me wrong, it hurts to miss a payment and screw up, but it’s not something that is a habit. I’m looking forward and have so many other financial worries that it won’t weigh on my mind for very long.
After missing a payment, I figure I can call the credit card company and ask for forgiveness on the charge. Or maybe they can waive the missed payment in terms of my credit score.
Beyond that, I don’t really have a plan. Let me know in the comments if you know of a better idea.
And like I said, I won’t dwell on this failure for long. In fact, by the time I’m done writing this, I’ll have a scotch and it will all be a distant memory. I’ve always been able to put the past behind me and push forward. Sure I have a little pity party, but it’s very short lived. Then I move on.
That’s why I figure I can make a good entrepreneur, someone who can deal with failures and setbacks but still push forward. Ah, but that’s a story for another day.