Debt has been compared to many life-threatening diseases. A few rash moments of carelessness can cause one to be financially stopped by a roadblock known as debt. High debt balances can make it impossible for some people to obtain an auto loan, mortgage, student loan, credit card, cell phone, a lease on an apartment, and even certain jobs.  Debt can undo all of one’s financial progress – it can leave a person poor and broken financially for a lifetime.

Accumulating debt is easy and lulls one with the instant gratification that it brings, and the scariest part is that it can destroy your credit rating for a long time.  Before you take your credit card out to purchase a new pair of shoes, or plan your fantasy vacation financed with a home equity loan, stop and consider it carefully.

Everyone is watching your score

Any time that you rent an apartment, sign a new cell phone contract, apply for an auto loan, or purchase your first house, financial institutions are looking at your credit score. In fact, it is even becoming more commonplace for a potential employer to run your credit score to ensure that you are a financially responsible person.  Your credit score is determined by the amount of financial debt you have and how you manage it. Your credit score is your lifeline to obtaining a mortgage, an auto loan, and even a lease for an apartment.

If you have written a bad check in the past, or overdrawn your account balance, you might not be allowed to open a checking account in the future. Paying bills late, skipping monthly payments, bankruptcies and repossessions are usually reported to the credit bureaus and becomes a part of your credit profile. A bad credit report is oftentimes harder to shake then a record of criminal activity.

If you want to be approved for a mortgage or a car loan, it is crucial that you try to keep your credit score high.  If you have a bad credit rating, the interest rate on your loan will be prohibitively high – thus keeping you in the poorhouse.  If you have a low credit score, you should consider paying off your debts and making your monthly payments on time.  This will help to turn a negative into a positive; however, it will take time to erase the damage caused by mismanaged debt.

Improving bad credit is a waiting game

Currently, there is no set limit on the length of time that a credit reporting agency is able to store a person’s financial information. However, a credit history reports typically lasts for six years.  Once something is placed on a credit report it is difficult to make it go away. Imagine having to wait six years in order to obtain a car or a house. Mismanaged debt can stop you from living your life and from fulfilling your dreams. Debt can put you on a cash basis whether you like it or not.

A credit card may seem like the perfect way to purchase items that you want, but cannot currently afford.  However, before you know it, your minimum monthly payments will be more than the item you initially purchased.  Eventually, you end up paying three or four times the actual cost of the purchase in interest and financial fees. 

Mismanaged debt is often a vicious cycle and it is important to break it as soon as possible  Instead of accruing savings to put into productive investments, debt causes you to take your savings and put it towards unnecessary interest payments.

The silver lining

So, it looks like doomsday for you? Not really, you can get hold of your financial future by getting hold of yourself and setting a goal to eliminate debt’s stranglehold. In fact, debt can be used to improve your creditworthiness. Paying off the debt and going to a “as needed” rather than an “as wanted” basis will set you on course to achieve financial independence.