We all begin with no credit, a blank slate in a sense. From the moment you open your first account, any credit move you make will either help or hurt your credit. The majority of people can stop having bad credit by actually using credit and other financial accounts responsibly.
Make Sure You Pay Your Bills on Time Each Month
This is the most important thing you can do each month to prevent bad credit. Since payment history is the most important factor influencing your credit score, it’s no surprise that missing payments (by 30 days or more) can have catastrophic consequences. A single late payment will lower your credit score by many points, and a series of late payments can result in more serious consequences such as foreclosure, repossession, charge-offs, and collections.
Determine which Bills are Reported to Credit Bureaus
There can be months when you’re cash-strapped and can’t afford to pay for it. Regrettably, you can have to pay certain bills while ignoring others. Protecting your credit score entails paying all of your bills on time, including credit cards, loans, and mortgages. That’s not to suggest you can disregard your other bills; if you don’t pay them, they, too, will wreak havoc on your credit. If you have to miss a payment, make sure you have a plan in place to catch up.
Don’t Get Yourself into too much Debt
The amount of debt you have is the second most important factor that affects your credit score. Credit scores take into account not just the total amount of debt you owe, but also how your credit card balances compare to your credit limits (credit utilization), as well as how loan balances compare to the original loan amount. Reduce your debt by keeping your credit card balances low and making your monthly loan payments.
Your payment patterns can be influenced by the amount of debt you have. Too much debt will make it difficult to keep up with your monthly obligations, causing you to fall behind. Recognize the symptoms of excessive debt and cut down on your credit card expenses before you get into trouble.
Consider The Options Before Adding New Expenses
Whether it’s upgrading your phone service or purchasing a new vehicle, each new monthly cost has an impact on your ability to make ends meet. We always introduce new monthly bills without thinking about how they would impact our ability to pay all of our other bills. Before you commit to something else, think about how it will affect your monthly budget.
Reduce the Number of Credit Card Applications You Submit
Each credit application you make adds to your credit report an inquiry. These inquiries account for 10% of your credit score, and depending on the other details on your credit report, they can cost you scores of points. Aside from making so many requests, a large number of credit card applications will result in a large number of credit cards, balances, and payments to keep track of.
Build Healthy Savings
Saving money has no impact on your credit score because bank balances aren’t taken into account. However, getting funds set aside will help you prevent some of the issues that can lead to poor credit. If you have a big unforeseen cost, a rainy day fund, for example, will help you make debt and other payments.
Significant life changes can also interrupt your life, making it difficult to maintain your credit. The death of a loved one. Unemployment is a concern. Injuries. Divorce is a common occurrence. The best thing you can do to stay alive and keep your credit is sometimes the last thing on your mind. Don’t be concerned. When you’re back on your feet, get your foundation in order and focus on restoring your credit.