These days, no one could be immune to possible bad credit. Many people are incurring either a job loss or a reduced income. Some just could not control their personal finances effectively. A bad credit score has become very common especially now that many consumers find difficulty in meeting financial obligations.
No one wants to incur bad credit. That is for sure. Getting a poor credit rating is like a curse. It could mean many other problems and difficulties. Bad credit could be a passport to higher interest rates and discrimination from banks and other financial institutions. Fortunately, incurring bad credit could be avoided. Here are five rules you could observe to do so.
1. Pay all of your bills on time. Experts believe that consumers should always observe this rule. Delayed payments could easily be categorised by lenders and other financial institutions as a sign of financial distress. Why pay your bills late when you could actually settle it on or before the due date? Not paying bills on time could open the doors to many other risks that should be prevented.
2. Pay your bills in full. Credit cards often provide the option for minimum payments. Many consumers get into the trap. They think paying in partial could be advantageous. The truth is, paying bills in partial could be costlier. The longer a debt stays, the higher would be the interest payments and other charges. Doing so could also get you into the cycle of possible increasing your debt further. To avoid problems in doing so, use your credit card wisely. Do not buy items that are too expensive that you could not possibly pay for them in full at the end of the month.
3. Avoid overspending. If you have credit facilities like credit cards and personal loans, it could be easier to give in to temptations to buy and buy more. Thus, many consumers end up getting close to their credit limits. Experts advise using just about 30% of your total available credit limit.
4. Do not apply for a credit that is too huge. Certainly, having credit always available is great. But it could be really tricky. Why apply for too many credit cards, lines of credit, personal loans, or home equity facilities in a rush and in great amounts when you do not have an actual need for them? Getting too much available credit could only open risks as you could encounter too much pressure from the temptation to overspend.
5. Do not get into default. No matter what happens, try not to ruin your credit rating by doing so. A default could instantly bring your credit into limbo as it is interpreted by everyone as an indication that you are in real financial trouble. It may take many years and a lot of extra efforts to reverse and counter the implications of a possible default. Try to find alternative and logical ways to avoid getting into one. Treat getting into a default as a mortal sin that would surely lead to bad credit scores.