Some people pay every bill on time; some people procrastinate unpleasant chores like bill paying. Unfortunately, procrastinators end up paying dearly for their bad habits.

If a person pays their credit card bills late, the credit card companies can take numerous negative actions. They can report it to a credit scoring agency which will send the person’s credit score plunging by hundreds of points. They can, and will, add fines and late fees.

If a person pays any bills at all late, in fact, it is likely to be reported to the credit scoring agencies.

If they pay their bills TOO late, services like cable TV, utilities, and telephone can be cut off, and there are always reconnection fees.

Once a credit score has plunged, it becomes much more expensive to borrow money because the borrower is seen as high risk and they have to pay significantly higher interest rates.

Sometimes it is impossible to pay a bill on time.  If you do not have enough money then the important thing to do is to contact the company and explain the situation to them and tell them when you can pay – and then DO pay!

However many people simply don’t pay on time because they’re disorganized or they hate unpleasant chores. Just put those bills on automatic. It’s very easy to have a bank or an online service send out payments on time these days; doing so can save you a lot of money in the long run, and can save your credit rating, too.

Your credit score has enormous power over your life and your financial affairs – so it is vital that you aren’t paying for mistakes that aren’t yours.

According to the Federal Reserve, up to 79 percent of credit reports contain errors, and 25 percent of them contain errors so serious that they result in credit being denied.

This is especially crucial these days when loan standards have tightened and if your credit score is less than perfect, you may not qualify for a mortgage, car loan, or student loan.

A low credit score also means much higher percentage rates on your credit cards, your mortgage loans, your credit cards, and any other loan that you are approved. You could easily end up paying thousands of dollars a year more than necessary simply because of errors on someone else’s credit score.

It is vital that you regularly review copies of your credit report to make sure that it is accurate. If there are errors, you need to send a letter to the credit reporting agency disputing it, and to the company that provided the inaccurate report.

You must keep pursuing the credit agency and the company which gave the false information, sending them letters and keeping copies of all correspondence to and from them, until the errors are removed from your report.

If you don’t, you are giving away money that you could be saving or using to pay off bills.

As more and more layoffs, pay cuts, and mortgage resets plague the economy, people are finding themselves increasingly financially stressed. Some of these people are going to check cashing companies, writing personal checks, and borrowing cash against those checks.

This is an extremely dangerous thing to do.

Here is what check cashing companies bury in the fine print of their contracts: if the check is over a certain amount – it varies by state – and you do not pay them back in full, with interest, by the due date, they can and usually will report you to law enforcement authorities for writing a bad check.

This is a CRIMINAL charge. Not a civil charge. You can be arrested for writing bad checks. You can go to jail. You can have a criminal record forever.

All because you borrowed money and were not able to pay back your debt in full within a couple of weeks.

It’s the modern day equivalent of debtors prison.

If you miss a credit card payment it will be reported to credit bureaus and likely to collection agencies, and they can get a civil judgement against you, and possibly attach your wages.

However they can not take you to jail for missing a payment.

You can go to jail for not paying back a check cashing agency. It is never safe to use them because if there is any emergency that causes you not to be able to repay them, you are risking your future for a few hundred dollar loan.

So if it’s a choice between missing a credit card bill or a utility bill or a cable bill, or using a check cashing agency – the credit card and utility companies and cable companies all will work with you. The check cashing agency will not.

So there’s a new videocamera that you absolutely must have, or you need a new work wardrobe, or your old TV just isn’t cutting it any more, or your family hasn’t been on vacation in YEARS and you are looking longingly at cruise manuals.

Here’s the question that you need to ask yourself before you go into debt to finance your purchase: What’s going to be different about my finances a year from now? Or even six months from now?

Here’s why you need to ask yourself that question:

Whatever you are paying to finance, is going to be second-hand, or consumed and forgotten, as soon as you pay for it. Next year you will have a used video camera, last year’s model of a big screen TV set, or last season’s designer clothing which are now worn and secondhand. And you will still be paying for it every month, WITH interest.

And guess what? Now you need a NEW toy, and new clothes, and another vacation, and another TV.

But odds are very good that you still are earning the same salary and still have the same basic expenses. Or in this economy, you may be earning LESS and spending MORE – gas prices go up, food prices go up, companies go out of business, new jobs pay less, Christmas bonuses don’t come through and pay cuts are required…

So all that you achieve when you put something on credit is to dig yourself deeper into a financial hole.

Are you going to take on a second job so that you can quickly pay off that debt? Do you have a big chunk of cash, or a bonus from work, coming in, that you DEFINITELY can count on to pay off that debt?

If your financial situation is going to be the same in six months or a year – do NOT take on more debt, because it becomes a neverending cycle with you giving up future savings and security to support the owners of credit financing companies, not yourself and your family.

Rates are dropping low enough that it might make sense to refinance your mortgage,  but keep a few things in mind before you do so.

Refinancing can negatively affect your credit score in the short run.

If it saves a few hundred dollars a month, then it may well be worth it.

However, refinancing can affect your credit score in several ways.

If it’s reported to the credit scoring agencies as the same loan, but with changes, here is how it might affect your credit score: the credit inquiry  that will be done can make your credit score drop a few points, because any credit inquiry tends to lower your credit score.

Changes to the terms of the loan will be reported, and that may also affect your credit score.

If the modification is reported as a “new” loan that will negatively impact your credit score more, again, in the short run at least. This is because the credit agencies will see the new loan as having a new “open date” which generally means that a person has taken on a new credit obligation. This means that the person is more of a credit risk because they owe more money.

1. Thou shalt learn the difference between “needs” and “wants”.

2. Thou shalt not use credit to purchase expensive toys.

3. Thou shalt create a budget and stick to it.

4. Thou shalt not covet they neighbor’s mortgaged-to-the-hilt McMansion, nor his soon-to-be-repossessed Ferrari, nor the big screen TV he will be paying off for 5 years at 28 percent interest.

5. Thou shalt set aside money for emergencies every month.

6. Thou shalt not spend more than you earn.

7. Thou shalt not live beyond your means.

8. Thou shalt not open any new lines of credit.

9. Thou shalt teach thy children from an early age how to manage money responsibly.

10. Thou shalt not ever make late payments, because they ruin your credit.

In the eyes of credit scoring companies, not all debt is created equal.

There are different types of debt, and some can do considerable damage to your credit rating.

Installment loans are not harmful to your credit rating as long as you always pay on time.

Installment loans are the type of loan where you borrow a fixed amount, and pay it back over a fixed period of time. For instance, a 30 year mortgage, or a 5 year car loan.

Both of those loans are also considered secured loans, because if you do not pay them back the bank or the car company can take back the property.

Revolving loans are much worse for your credit. credit cards are the most common kind of revolving loans.

With credit cards, the interest rate is higher because there is no security for the lender – they can’t come and repossess that expensive dinner you charged, or foreclosure on the sweaters that you bought or the vacation that you went on.

Also, the amount that is owed on a credit card varies month by month  and you always have the ability to run your credit cards up to the limit (which is terrible for your credit).  And people are more likely to default on credit card loans than they are on home loans or car loans – so credit card loans are considered riskier by credit scoring agencies.

If you must have a credit card, make sure that you do not have a balance that is more than 30 percent of your total credit line, and ALWAYS pay your bill on time – paying late even once can send your score plummeting.

To get out of debt, you’re going to need to figure out what got you into debt in the first place.

Yes, you may have had some bad luck. You may have been laid off, you may have bought more house than you can afford and then found yourself unable to sell it, you or a family member may have been hit by huge medical bills.

But odds are pretty good that’s only part of the problem.

If you’d built up an emergency savings cushion of 6 to 10 months worth of living expenses, it is very likely that you wouldn’t be facing these issues.

So what were you spending money on when you should have been saving money?

Do you spend too much money on luxuries that you think you absolutely must have, like expensive salon visits, designer clothes, electronic toys, pricey vacations?

Do you spend too much on your children, buying them brand new items the minute they hit the shelves at stores?

Do you spend too much on convenience, like having dinner delivered, maid service, lawn service, et cetera?

Do you simply plan poorly, always meaning to set money aside at the end of the month, rather than designing a savings plan and always sticking to it?

Look at your past spending patterns to determine what lifestyle changes and priority changes you need to make – or you’re likely to be doomed to debt forever.

Have you ever heard the expression penny wise and pound foolish? It means doing things that save money in the short run but end up costing you a lot more in the long run.

Sometimes it pays to do things right the first time around rather than paying a lot more later.

For instance:

Putting off doctor’s visits , and then ending up seriously ill, or putting off dentists visits and routine cleanings, and ending up needing much more extensive dental treatment like root canals or tooth extractions…is penny wise and pound foolish.

Skipping routine maintenance and oil changes on your car or truck and then needing to spend thousands of dollars in auto repairs as a result…is penny wise and pound foolish.

Not paying credit card bills and then being hit by big fees and a higher interest rate….is penny wise and pound foolish.

Fixing things around the house yourself when you don’t know how, and then having to pay a repairman to come and fix the damage you caused, and also fix the original problem, is penny wise and pound foolish.

You get the idea. Pinching pennies can be smart, but not when it leads to a much bigger bill down the road.