As a result of the recent downgrade of the United States government debt by the ratings agency Standard & Poor’s, the world witnessed President Obama scramble to do damage control while the global stock markets tanked, and women rent their garments.
I’m not sure about the last part, but people were really upset. And the reason why the worldwide financial markets panicked at the downgrading of the U.S. debt was out of concerns that the government would be forced to pay higher rates in the future and drag down the economy with it.
If you are deep in debt then you should know that your credit card companies review your credit rating on a periodic basis and if they don’t like what they see, your interest rates will go up and your credit will be cut. That will sure drag your personal economy down.
What to do? Here are some action items to avoid a personal credit downgrade.
Know Your Score
You have a personal credit rating, although we typically refer to it as your credit score. If you want to protect it, and make sure that your ability to keep low interest rates, start by knowing your score. The lower it is today, the less wiggle room you have for any negative action.
An easy way to get your score for free is by signing up at Quizzle.com. If you don’t trust third parties with your personal data you can also pay to get your credit score from any of the main credit bureaus.
Pay Down Your Debt
Enough said about this one. It’s the reason for this website. But know that the less debt you have (especially as it relates to your available credit) the higher your credit score in theory. You also want to consolidate debt from revolving balanced to fixed-rate loans if you can.
Build a Cash Reserve
It’s tough to think about saving while also paying off bills, but everyone needs an emergency backup. If you lose your job and can’t work those missed payments will do more damage to your credit score than carrying a balance on your cards.
Brush Up Your Resume
Speaking of losing your job… Now that unemployment is holding at over 9%, it’s critical to have a job loss action plan. You need to take steps before the pink slip arrives to get right back into the hunt for a new job to prevent a prolonged loss of income.
Some of these steps include keeping a current and updated resume at the ready, knowing who in your network you would contact for job leads and making sure that there are no embarrassing pictures and posts about you on social media sites.
If you know that debt downgrade is possible in your personal life, you’ll do a better job of avoiding it than our government officials have.