Just imagine how surprised you’d be if your bank cancels your credit card apparently out of a blue sky. Can this be true? Sure, banks are monitoring all account activities and analyze them for identification of risky developments because listen to early warnings enlarges the scope to take appropriate measures. This could mean for you that your credit officer has to decide about “Go!” or “No Go!” for your credit lines including credit cards when your name appears on a internal watch list. Why you don’t use this simple strategy for your private finances too? On this way you reduce costs and avoid trouble with your creditors.
Let’s take a look at the early warnings of consumer bankruptcy:
1. Slumping Revenue – Exploding Expenses
Decreasing income with increasing expenses is one of the important but hidden warnings. Whether or not you’re running into illiquidity already, pay attention of this progress. Check your stream of cash (cash flow) periodically. May be it’s time to reduce your expenses or you’re going to reach your credit limits combined with higher credit costs.
2. Filled up Credit Lines
If you use your credit lines permanently then ask yourself: Why? May be you underestimate the risk of exceeding limits through unexpected purchases. Further you waste money because you have to pay a lot for higher interests. No need to say that your credit history is a part of your credit score.
3. Ignoring Mails and Phone Calls
Do you ignore statements of account, bills, and duns already? That could be an evidence that you shut off your money problem. Avoiding phone calls from your bank could be a result of your remorse. It’s time to act. Be sure your creditors are not passive.
4. Friends as Creditors
Are your friends a part of your creditors? This could be a further warning. Friends are most often the last help before people run out of money because in this time banks have stopped their lending activities already.
5. Repayment of Overdraft by Credit Card
Do you repay your overdraft by credit card? May be you have a liquidity gap temporarily. Nevertheless it’s time to check your income and expenses because you have to get information about your liquidity in the future.
6. Return of direct debits
Return of direct debits by your bank should leave at you all the warning lights illuminate.
7. Reduction of Living Expenses for Repayments
Do you believe that you are able to pay off your debts by reduction of your living expenses? My opinion about this: Don’t try this at home! Because it’s difficult and few people are able to handle it. If you want to check it out although, test your financial power via an investment plan. So you can save money, build up your equity and completely without risk.
If you find yourself in one or more of this points then it’s time to act before your creditors wake up.
Photo: © N.Schmitz / PIXELIO