When people find out that I write about personal finance, the floodgates usually start with them talking about the state of their financial affairs. And, for the most part I’m OK with it because I love talking about money.
As of late I’ve come across some people who are in a financial bind because they are holding out for someone else to pay a delinquent bill. This can involve a cosigner who hasn’t lived up to their end of the deal by making payments on time. Or a neighbor who caused damage to your property and instead of paying the contractor yourself for the repair, you’re waiting on the neighbor to pony up.
Meanwhile, your credit is in the toilet waiting for both parties to settle their issues with one another.
Here’s my take on that issue.
While I don’t believe in chasing a 800 credit score, I also don’t believe in allowing in to languish in bad credit hell either. If life happens and you need a new car or apartment and you have a collections account, lien or judgement sitting on your report, say hello to a denial letter or higher interest rates.
Not to mention the harassment by the collections agents for payment while you’re busy waiting for the other party to pay the bill. This is all kinds of mental stress you never need in this life. What you’ve gotta realize is that even if they do pay up later while you waited, those delinquent items stay on your credit long after the dispute has been resolved.
So when getting into these situations where you have certain financial expectations of people, calculate the worse case scenario and plan for it. If you can’t afford it then don’t get involved if you can help it (cosigning a loan). The worst thing you can do so let that bill sit there and hurt your credit for 7 years down the line.
This may mean sucking it up and paying off a bill you had no intentions of paying, however, it is a momentary discomfort vs years of bad credit which shuts many doors for you or will cost you dearly to open them. Don’t allow your pride to screw up your financial futures as it relates to credit. If you can’t afford it don’t do it or resolve it in court. But do all you can to make sure that derogatory items don’t make it to your credit report.
Have you made a few bad credit moves that you aren’t proud of?