Avoid Bad Credit with these 8 Steps
We all begin with no credit and from the time you open your account every credit move will either put us towards good credit or bad credit. Bad credit can be avoided by making the right choices.
Here is how you can avoid bad credit according to globalfinanceinformation.info.
Pay your Bills on time Each Month
You need to do this every month in order to avoid bad credit. One of the biggest influencing factors that affect your credit score is your payment history. Missing a payment then has the ability to crush your credit score.
Just one late payment can drop your credit score by quite a few points and further missed payments can lead to repossession, foreclosure, collections and charge-offs.
This also applies to accounts that do not directly report to the credit bureaus as missing these payments can lead to a collection agency being sent and this can end up on your credit report. Even a library fine can hurt your credit score.
What Bills Report to the Credit Bureaus
There could be months when you are strapped for cash and you are not able to pay for everything. This means that you might be able to pay for some bills, but will have to skip others.
In order to protect your credit score you need to stay current on your bills that are on your credit report like your loans, credit cards and mortgage.
This however does not mean that you should ignore your other bills as if these are left unpaid they can take a toll on your credit.
Don’t Take on Too Much Debt
The second biggest factor that affects your credit score is your debt level.
Credit scores do not just take into account the amount of debt that you have in total but also how your credit card balances compare to your credit limits and how your loan balances compare to the original loan amount.
You should then keep your credit card balances low and ensure you make regular loan payments.
Your level of debt can also affect your payment habits. If you have too much debt then you may find it difficult to make your monthly payments.
Manage Your Money
If you are bad with money then you may find it difficult to make your credit and loan payments. This is then followed by bad credit.
You need to learn how to manage money so that you stay out of debt, protects your credit score and so you can reach your financial goals.
Think About a New Expense
Every new monthly expense will affect your ability to live. You need to consider how a new monthly expense can affect your ability to pay your other expenses.
Minimize your Credit Card Applications
Every time you make a credit card application it shows you made the enquiry on your credit report. These count 10% of credit score and you can drop points depending on other information that is in your credit report.
Know When You Are Having Trouble
If money is tight then you shouldn’t rely on your credit cards to get you through. You should rather reduce your spending and live within your means.
Have a Healthy Savings
Saving money will not directly affect your credit score, but when you save money you can avoid problems that lead to bad credit.