Q. Last year, the economy forced me to close my business. The business didn’t make me wealthy, but I earned enough to pay my mortgage and car loan. I’m now in default on my mortgage and haven’t made a car or credit card payment for almost three months. Should I apply for loans before my credit rating is negatively affected? — Drew
A. The recession has challenged many businesses and individual’s finances. Financial institutions report to credit bureaus frequently, so your credit rating may already reflect your delinquency. Contact your finance companies to make an amicable arrangement.
Seeking more credit will not solve your problems but create more: The solution is to reduce expenses, pay down and manage debts and focus on increasing income. This may involve liquidating some assets such as stock holdings or furnishings to satisfy your obligations. A loan can be useful, provided it’s used to consolidate debt.
Keeping good credit impacts your ability to borrow, obtain competitive interest rates and lower insurance premiums as well as maintain a positive self-image. That’s why it’s important to be proactive — don’t just wait for the hammer to fall.
– Henry Choo Chong, CGA, can be reached at firstname.lastname@example.org and 416-485-5225.