As soon as you borrow money, you are putting yourself at risk when it comes to damaging your credit rating. While responsible borrowing, always making your repayments on time and ensuring that you make regular repayments every month will make sure that your credit score comes to no harm, just one slip up could mean that your score is seriously damaged for a long period of time. Missed payments, late payments, and other issues can stay on your credit file for years, making it difficult for you to borrow any more money in the future and potentially even getting in the way of your ability to work in certain jobs, such as careers in the finance industry. Thankfully, there are several steps that you can take to prevent your credit score from dropping to a poor status and ensure that it stays at a good level. Here are our top tips to help you do just that.
Tip #1. Always Repay Debts on Time:
When it comes to repaying your debts, even if you are only able to make the minimum payment each month, making sure that they are paid on time should be your top priority. When you make a payment late, this will be recorded on your credit file and could signify to other lenders that you do not have the financial means to make your payments in a timely manner, which could affect your ability to borrow money in the future. The best step to take to prevent this from happening is to pay all of your debts off by setting up regular automatic payments from your bank account to your creditors; this will ensure that you never forget about a payment and you’ll be able to relax and know that it has been made on time.
Tip #2. Avoid Borrowing Too Much:
Whilst borrowing some money and paying it back responsibly can be a good thing for your credit score, borrowing too much can start to cause problems for your financial situation. When you borrow too much money, this can negatively impact your credit score since any lenders who check it may be reluctant to lend more money to you as it will put you in a position where you’ll be struggling to repay it all. As a general rule of thumb, it’s a good idea to ensure that your current debts are at least almost fully repaid before you begin to think about applying to borrow any more money. This will help you to keep your debts at a manageable amount and avoid getting into trouble with your credit score.
Tip #3. Curb Credit Card Spending:
Today, having a credit card is very normal and many people use them to pay for everyday things such as groceries or household bills, before simply repaying the credit card bill each month. However, spending too much money on your credit card could signify a red flag to lenders and have a negative effect on your credit rating. Financial experts recommend never spending more than 50% of the money available on your credit card at any one time; for example, if you have a limit of $1,000, then make sure that you always have at least $500 on there available to spend. Not only will this mean that it’ll be easier for you to afford your repayments, you’ll also never need to worry about accidentally going over your credit card limit.
Tip #4. Check for Errors:
Sometimes, errors on your credit report could mean that it is lower than it should be. Although it’s not a very common occurrence, creditors can sometimes make mistakes when it comes to recording things such as when and how you made repayments. This is why it’s important to regularly check your credit report to make sure that nothing has been recorded in error; for example, if you made a payment but your credit rating says that you did not, this could be affecting your credit score and bringing it down. If you find any errors, it’s a good idea to speak to your creditor as soon as possible to rectify them. If they fail to honor your request, consider consulting a credit law firm like Fair Credit to help escalate your dispute.
Tip #5. Remove Collections:
If you have ever had any debts in the past which have been sold on to a collections agency, then this could be bad for your credit score in a number of different ways. Even if you went on to pay off the debt in full, the details will stay on your credit file for several years and could affect your ability to get a mortgage, loan, credit card, or car finance in the future. If you have a collections agency on your credit report, there are several methods that you could use to have it removed. One of the best steps to take is to speak to a credit repair company who will be able to help you remove the details from your report. More information can be found here on having a collection account removed from credit report.
Tip #6. Pay Bills on Time:
Lastly, bear in mind that it’s not just your lines of credit that can have an effect on your credit rating. If you pay household bills, rent, and have other automatic payments going out of your account, then these could also have an impact on your credit score if you don’t pay them on time, or fail to pay the full amount each month. Make sure that you have set up automatic payments for your rent and household utility bills each month so that missed payments don’t bring down your credit score and affect your ability to borrow money in the future. Don’t forget your cell phone, either – if you have a cell phone contract, this is also considered a line of credit and any late or missed payments will bring your credit score down quickly.
If you are hoping to improve your credit rating or maintain a good score, then there are several ways to go about doing this. Did these tips help? Let us know in the comments.