In my post Formula To Be Financial Free Part 3 : Controlling your Debt I mentioned that we must learn how to control debt like rich people. So today I would like to add some more information here.

In my last post Financial Freedom Formula : Getting Started I touch a topic that most of us concern about CREDIT. So today I want to give you a brief information about what is the relation between debt and credit.

Credit is essentially a sort of proof that you will repay and money borrowed with interest on time. Your credit will be good if you pay your debt and interest from time to time. However, the bad news is nowadays we have too much of debt until we can’t pay them even the minimum interest.

So eventually, our credit will be getting lower and lower. When your credit is low, you have to get a higher interest debt. However when you get the higher interest loan, it will be harder you pay down the debt and eventually, again, you credit gets even lower! This is a vicious circle.

So what can you do? If your credit is really low, what I suggest is you must pay down some of your debts. At this moment, there is no point for you to talk about investing and financial freedom as you are in trouble. So first thing you need to do is settle down your debt to gain back your credit. When you credit is higher, you can refinance all your debt to get a better deal so you can control your debt easier.

In conclusion, to gain back your credit, you must change my formula. First budget your money and pay down your debts. Only after you gain back your credit then you can start investing.

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