“A journey of a thousand miles begins with a single step,” said Chinese philosopher Lao Tzu in his book, Dao De Jing. October 20—National Get Smart About Credit Day—is an excellent opportunity to begin your financial journey. No need to make the entire field trip in one day; just getting a start on getting smart will help!

National Get Smart About Credit Day

The American Bankers Association (ABA) marked the first National Get Smart About Credit Day in 2003, and 19 years later, we still have much to learn to boost our credit scores, secure our creditworthiness, and protect our credit history. 

The Beaumont Enterprise noted that, for 2022, Texas has the second-largest credit card debt increase with an average household credit card debt of $8,681 and a household credit card increase of $593 over 2021. 

So let's talk about what Texans can learn about credit and debt, expunging debt, and protecting themselves from harassing creditors. 

Credit Basics

For Texans eager to recreate the free, frisky, and wooly days of the Wild West, credit is an ideal frontier. Very few protections exist for debtors while many protections exist for creditors. Poor consumer education and ravenous creditors can cause an unwary Texan to stumble into serious financial distress from credit problems and debt. 

The Texas office of Consumer Credit Commissioner offers an entire page of links to financial education resources anyone can use to become smarter about credit and debt. 

The single step you can take, right now, to become smarter about credit is to understand just four basic concepts: 

1. Almost no adult Texan can function in today's society without borrowing money; good credit is your path to borrowing at low interest rates
2. To borrow money, you either must show income (for unsecured debt) or provide collateral (for secured debt like mortgages and automobile loans)
3. Credit can be through secured loans (collateral) or unsecured loans (bank credit cards, gasoline cards, store credit cards, affinity cards)
4. The more income you have or more valuable your collateral, the more credit you can obtain and the more debt you can take on

Watch Out!

With credit comes responsibility, and that often is a problem for struggling Texans. Consider these fundamentals about your credit score and credit history: 

• Every American adult has constantly changing credit scores maintained primarily by three credit reporting agencies—Equifax, Experian, and Transunion
• Your credit score changes not only because of your actions, but also from changes in financial markets; your score changes just about every day
• A credit score is not identical to a credit report
• By federal law, you are entitled to a free credit report from each of the three bureaus once a year—if you use the correct link—so you can check on your creditworthiness up to three times a year, every year!
• Checking your own credit score and getting a credit report does not harm your score
• Getting a free credit score snapshot is often possible through your own credit card companies, so avoid paying for the sneak peek
• Your credit score is based mostly on your payment history, ratio of the amount of credit you have used to the amount available, and the length of your credit history (though other factors affect it)
• Fair Isaac Corporation (FICO^Ⓡ) scores range from 300 (really, really bad!) to 850 (impeccable!); aim for 670 and you will probably won't be turned down in a credit application

Credit and Debt

In today's challenging financial environment, credit can help you bridge gaps between income and expenses. If, though, you use too much credit and are unable to pay down your debts in reasonable time, you face debt crises. 

Some debt is not designed to be paid in full every month:

• Mortgages
• Medical bills
• Automobile payments

Unsecured debt (gas, store, and bank credit cards) ideally should be paid down every month. Debt can build surprisingly fast. Many folks are unaware of the total amount of unsecured debt they carry, using it to string out payments until the next paycheck. 

When debt overwhelms, credit scores drop, money becomes more expensive to borrow, and credit dries up. 

Bankruptcy

You can get smart about credit and short-circuit some of the woes of all-encompassing debt by considering Chapter 7 bankruptcy or Chapter 13 bankruptcy. Both are legal, useful defenses against:

• Creditor harassment
• IRS garnishment
• Mortgage foreclosures

Many credit strategies and protections exist for creditors, banks, and lenders. Bankruptcy is one of the few tools available to level the financial playing field, to fight your way back from credit and debt distress. 

Enlisting an experienced bankruptcy attorney is a very smart strategy when you are facing a debt and credit crisis. Take the first small steps toward relief. Attorney Théda Page of The Page Law Firm draws on more than 30 years' experience dealing with credit, debt, and bankruptcy. Contact The Page Law Firm today or by telephone (214) 618-2101 for a complimentary strategy session.