How To Avoid Having Bad Credit
Starting out with no credit scores is common for everyone. However, after you open your first account you will either begin to move towards good credit or bad credit. It will not be difficult for people to avoid having bad credit if they make a small attempt to understand how to avoid having bad credit.
Proper financial management is the key to understanding how to avoid having bad credit. You will also do well if you decide to follow the following tips which will definitely help you obtain good credit ratings without having to go through a lot of difficulties. What are the steps you should be taking to avoid having bad credit?
Timely payment of bills every month
If you do not want to accumulate bad credit ratings timely payment of bills every month is a habit you must develop. Your credit history will be one of the biggest factors that will affect your credit score and therefore you can rest assured that your scores will be devastated if you are missing payments by 30 days or more regularly. Late payment of a single bill can drop your credit score by several points and get into the habit of making late payments regularly can worsen things for you. It also applies to accounts that are not usually reported to credit bureaus and therefore you cannot afford to take chances on any bills.
Understand the bills which are reported to credit bureaus
You will come across some months when you are strapped for cash and unable to pay all your bills. You will not have the option of skipping all bills because you must pay the current bills on credit card, loans, mortgages, Etc. This does not indicate that you can ignore the other bills because they will ultimately affect your credit ratings.
Keep the debts you incur in check
The level of debt you have is another factor that affects your credit score. Credit scores not just consider the sum total of the debt you have but also your credit card balances and the balances of any loans you have taken as compared to the principal amount given to you. If you want to reduce the amount of debt you have you should be making regular loan payments and keeping your credit card balances low.
Learning how to manage your money
If you are not aware of how to manage your money you will in all likelihood have trouble managing your credit card and loan payments. Bad credit will inevitably follow when you are not managing your money effectively. Being good at money management will keep you out of debt and make it possible for you to protect your credit score.
Think before you take on additional expenses
Every expense you incur during the month will affect your ability to manage your funds effectively. Regardless of whether you are upgrading your phone service or buying a new car, you are in reality adding new monthly bills without considering whether it will affect your ability to meet other expenses. Carefully consider your monthly budget before deciding to take additional expenses.
Limit your credit card applications
Credit card applications can be made for free but every application adds an inquiry to your credit report. They take away 10% of your credit score and then remove dozens of points from your credit report depending upon how good or bad it is.
Besides making too many credit card applications will also mean lots of credit cards, balances, and payments to make.
Recognize trouble when you see it
Do not begin using credit cards when you find money is tight. Rather think about reducing your spending and consider working harder to live within your means. You should also be looking at increasing your income by way of a second job or by working overtime. The effort will give you some extra income that will be helpful in the long run.
Begin saving money
Your bank balance is not considered into your credit report, therefore, saving money will not affect your credit score. However, the money you set aside will prove helpful to avoid some problems that can possibly need to bad credit.
If you want to understand how to avoid bad credit that tips mentioned above should be helpful for you. Begin using them immediately if you are having difficulties managing your finances.
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