Having a good credit score can certainly make your life easier. People with good credit benefit by paying less for things like insurance and cars and have a greater chance of getting a good job. If you want these benefits it’s necessary to maintain a good credit rating, and there are many ways you can do that.
Here are seven simple and easy tips to avoid bad credit:
1) Pay your bills on time each month
If you frequently pay your bills late you increase your chances of losing points on your credit score, and lenders and credit card companies will start seeing you as a risky borrower. To avoid this outcome, you must be responsible and make an effort to pay your bills on time.
2) Identify which companies report to the credit bureaus
Emergencies happen, and when they do, they can ruin your budget, affecting your ability to pay your bills. If you find yourself in a situation where you can’t pay your bills on time, find out which of the companies that you owe report to the credit bureaus and prioritize these bills over the ones that don’t report to credit bureaus.
3) Don’t take on too much debt
We all know how difficult it is to restrain yourself from buying everything you want, particularly if you have a credit card. But remember that you will have to pay later, and you might not have enough money if you purchase things irresponsibly. The amount you owe can significantly affect your credit score. Try to keep your credit utilization rate low and pay your balances on time to reduce your debt.
4) Manage your money well
Set a monthly budget that fits your wage and make sure you stick to it! Draw up a budget on paper or use an app and take notice of the money coming in and out. By doing this, you will have a clearer idea of how much you can spend and make wiser spending choices.
5) Think before you take on new expenses
Are you an impulse shopper? There’s a simple tip you can implement in your life called the ten-second rule. Stop and think whether that item you want is essential. Is it going to be useful to you? Take some time, go for a walk or shop around. If you still feel the urge to buy the item you can always go back to the store and purchase it, but, more often than not, the impulse to buy the item will disappear.
6) Don’t apply for too many credit cards
Each time you apply for a new credit card, there is a review of your credit profile. Each review shaves points off your score. An effective way to avoid bad credit is to avoid applying for too many credit cards over a short period of time.
7) Have an emergency fund
Lots of people fall into a massive pile of debt and hurt their credit scores after unexpected expenses such as medical bills or house repairs. An emergency fund can relieve you of financial stress and reduce the chances of hurting your score.