It is amazing how quickly a comfortable lifestyle can degrade. It is equally amazing how many people have no idea how they got there. Good credit is not just something that happens; it is something you must work on to keep. If you find yourself suddenly with credit denials and those nagging collection phone calls, you may be a victim of ‘Good Credit Gone Bad’.

If you find yourself in this dilemma, the first thing to do is ‘Stop’ and survey the damage. You need to sit down, pull out all the bills and bank account statements and find out where it started. You may be thinking, “Who cares how it started; how do I get out of it!” If you want to be sure you do not end up there again it is important to find out how it began. Bad credit habits must be broken. It’s like going on a diet; unless you completely change your lifestyle to keep the weight off, it will come back.

So you now have lots of neat little piles spread out before you, so where to start? Grab a notebook and a pencil. Begin with your basic living expenses. Leave out those that you can live without – bare basics. Create a column with your average bring home income for one month. Be realistic. Subtract, one-at-a-time each living expense. Rent or mortgage, savings, car payment, utilities, telephone, gas and any other living expenses or expenses that you must have to keep your job. What is left, are your discretionary expenses.

Check your accounts and calculate the average you spend on groceries per month and subtract that next. Now, groceries are not really discretionary. You must eat to live. However, the amount you spend may be too much. If you have children that have extra-curricular activities, subtract those expenses next. These are the discretionary expenses you can least live without.

Hopefully at this point you still have a positive balance. If not, you are in real trouble and probably need some professional intervention. Otherwise, read on. Now, you need to take a look at what is left and what outstanding expenses are left. Add all of the outstanding monthly expenses and subtract them from your balance. What does your balance look like now? Even if you still have a positive balance there is obviously trouble somewhere, or you would not be sitting among the piles trying to figure it all out. Look at all the rest of the expenditures each month that are not regular, monthly expenditures. Go back a minimum of a year. Include ATM withdrawals, dining out, entertainment, shopping for anything other than groceries… list these on a separate page in your notebook, one-by-one, with details and amounts. When you are done, take a long, hard look. Somewhere in here is your problem.

A list of common culprits and their remedies:

• Excessive ATM withdrawals – Place yourself on a ‘cash’ allowance by getting a set amount of cash each payday and limiting yourself to only that amount – it may help to leave the ATM card at home.
• Impulse buying – It is easy to get caught up in excessive impulse buying. You may need to make yourself stay at home instead of going to the mall. Only go out to shop when there is a viable reason to do so. (gift buying, seasonal purchases, etc)You may also need to see if you have a compulsive shopping disorder (yes, it’s a real disorder!).
• Eating out or going out too much – This one is a real budget buster! You are going to have to budget your dining out and entertainment expenses and stick to the budget. Invite friends over instead and have potluck!
• Credit card payments eating up your discretionary funds – This is an all too common culprit in this day and age. Accepting too many offers with inviting rates or terms can leave you with major payments on maxed out cards where making the minimum payments doesn’t really solve the problem. It is time to consolidate and alleviate the problem debts.

Some more difficult culprits and remedy suggestions include:

• Living above your means – This one is easy to create and harder to alleviate. Downsizing is your only answer. Trade the luxury car or SUV for one more economical and with lower payments; renegotiate a new payment plan with your mortgage company or find a home with less rent; cut out the New York strips on the grocery list and settle for a nice sirloin roast instead; and try clipping coupons. Pay off high interest credit accounts.
• Adjustable Rate Mortgages – With the state of the economy in recent years and the issues of the housing market, an adjustable rate mortgage may be killing your budget. A wildly fluctuating market can mean a house payment gone wild. Before foreclosure hits you, call your mortgage company and renegotiate your terms. They will work with you.
• Lots of Insufficient funds or courtesy pay fees – If you consistently get charged overdraft fees or courtesy pay fees (where the bank pays the draft for a fee) and especially right before payday then you can get caught up in a vicious cycle, where eventually your entire paycheck is going towards these fees, then all legitimate payments start getting behind. This one is an easy fix really, but can be embarrassing if you do not keep a tight rein on recordkeeping. Call your bank and tell them you want to opt out of courtesy pay. Just remember that you must do regular and detailed recordkeeping to keep from having a check returned or a debit card payment denied.

There may be other reasons or a combination of reasons for the downfall of your credit; but by this point you should be able to see the cause. Once you have determined the cause you must take the necessary steps to (1) fix your credit and (2) make sure you aren’t caught in the same predicament down the road.

Repairing your credit is not like quitting smoking; you can’t constantly be stopping and restarting. It has to be a firm decision on your part and a lifestyle choice. It will be something that you should think about every day until it becomes automatic. Once that happens, you can truly say you have control over your finances and can again enjoy living comfortably.

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