How to avoid Collections on your Credit Report

We hear lots of chatter in regards to how collections and late payments will affect your credit scores and credit report. We don’t hear much talk about how to avoid these pitfalls of credit. I see this problem time and time again. Most credit issues can be avoided with a little financial education. I wanted to discuss how to avoid these issues. This is just a matter of sacrifice and money management. Ok, here we go…

Create a Budget

The first step is to formulate a budget. You must know where all of your money is going. Here is a “How to Budget with Excel” link. Remember not to cut out all your fun. A budget with no fun is destined to fail. Just cut out the unnecessary spending as much as possible. Discover where you can save.

Keep all your receipts on everything you spend. Once you have your budget done, make sure you give yourself cash to spend on non-essentials. That way you can get a better idea on how much money you are spending in a month. It’s much easier to see your spending habits when you have tangible money in your hand or in a envelope at home. So if you budget an extra $50.00 bucks a week on non-essentials, then give yourself $200 bucks cash and keep it in a envelope. Once your $200 bucks is gone, guess what? Your fun is done for the month.


I will be the first to admit that saving money is tough. Let’s face the facts. Spending money is much more fun that saving it. But if you don’t save you will find yourself in trouble when problems arise. Like job loss, unplanned expenses, etc…….. So put your savings on auto pilot once you have arrived at a budget.

Most Certified Planners recommend saving 10% of each paycheck. Automatically have 10% of your paycheck deducted from your checking account and forget about that money. You will need at least 6 months worth of income in your savings account. If your net income monthly is $3000, then you will need to save $18,000 in your savings account. I recommend putting those savings in an account that produces interest. Check out for savings account rates.

Grind Stone Persistence

You need the same persistence with savings as you had when courting a girlfriend or boyfriend. Persistence always pays off. Keep your nose to the grind stone until the goal is reached. It’s ok to indulge occasionally, but remember to stay on course. Every time you go over budget you are defeating the purpose of protecting your credit.

The key to a good credit report and credit scores is having savings. This is the most essential tool for sound money management. Most families live beyond their means and don’t save enough. Stop trying to keep up with the Jones, it’s not worth it. You really don’t need a Mercedes Benz, or a BMW.  Most credit issues could have been avoided if the above mentioned was put into practice.

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