5 Tips for preventing a bad credit score
No one plans a bad credit score, it’s just that life sometimes throws a curveball to you where your credit history ends up badly damaged. Usually, it’s repeated mistakes that lead to low credit scores. And protecting your credit score does not seem to be a big deal till you find it’s time to borrow some money. So here are some tips which should help protect your credit score and prevent a bad credit score.
1. Keep ‘Good’ credit accounts open
You generally think it’s better to close credit accounts which you don’t use often. However before you do this, it’s better to first take a look at the account. If you have an account with a history of payments made in full and on time, it’s better to keep such accounts open as it provides a history that proves you can pay your debts responsibly. In fact, it will help your credit score for as long as you keep it without operating it.
2. Close all small loans, credit cards and credit lines
Cleaning up your credit report by paying off and closing small balances on open credit products helps prevent a bad credit score. Pay emphasis to the accounts with a history of late payments and other problems as these accounts can damage your credit score as they show your irresponsibility at making payments. Moreover, it’s difficult keeping track of so many small accounts when life gets busy, and can lead to more missed payments.
3. Apply for credit after your credit score improves
New borrowers with credit for a short time of less than 2 years will have a low credit score as you don’t have sufficient history to prove you are a responsible borrower. If you think opening additional credit products even if you don’t need them will help improve your credit score, you are wrong. Only apply for credit required and do not look for additional credit till your score improves as open credit balances affects your credit score. If you are in need of secured cards please visit our Building Personal Credit page
4. Be punctual with full payments
Falling behind on monthly payments to lenders, landlords and utility providers can tarnish your credit score as they regularly report to the credit bureau. Their word affects your score, and if you are late with payments, your score will start dropping.
5. Close revolving balances
The proximity of your revolving balances like credit cards and credit lines to your credit limit can prevent your score from slipping. Do whatever possible to keep your credit balances below your limits preferably using just 30-35% of your available credit. Payment delays leads to interest charges and missed payment fees which not only has a negative effect on your credit score, you may have to pay an additional fee to your creditor.
So just take responsibility of your finances and improve your wealth management with the help of these 5 tips to avoid getting a bad credit score. It’s good not only for your current financial standing, but also for getting a future mortgage or car loan.
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