Knowing how to avoid bad credit scores should be a major task for cardholders. Each credit move you make from the opening of your first account will either move you to good or bad credit. Bad Credit can be avoided by making the right choices with credit and other financial accounts.
What is a Bad Credit Score
According to FICO, a credit score that falls below 580 is poor. FICO also stated that 15.5% of the population has a credit score below 600, while the average credit score sits at 716. You have a 600 credit score places you just below the national average and into the “Fair credit” category.
Credit Card Applications Bad Credit
When it comes to credit applications with bad credit, there is no secret that you can use it to get one. The only thing you can do is select the right kind of card. There are two types of credit cards available for those with poor credit scores: Secured Credit cards and unsecured credit cards for people with bad credit.
These two types of credit cards report account information to the major credit bureaus every month, meaning that they can both help you build your credit if you use it responsibly. But they are far from equal when it comes to accessibility and cost.
Secured cards happen to be the easiest credit cards for anyone to get, offering great approval odds even to people with bad credit. Some of them do not check the applicant’s credit history, meaning that there’s no hard pull to hurt your score more. Secured cards also charge much lower fees than unsecured cards for bad credit.
How Do You Get Bad Credit?
There are several things that lead to bad credit cards, and some of these things might be what you do but you are not aware of. So, with that stated, the causes of bad credits include:
- Late Payment. The Payment history of a personal account for 35% of their credit score
- Collection Accounts
- Bankruptcy filing
- Charge-offs
- Defaulting on loans
These are some major causes of Bad Credit, so try to stay off these.
How to Avoid Bad Credit Score
Pay Your Bill Regularly
A single late payment can drop your credit score several points and constant late payments can lead to the worse like foreclosures, repossession, collections, and charge-offs. Payment of card bills is one thing that must be done every month. Late payment is a huge factor that affects Credit card scores.
Know Which Bills Report to the Credit Bureau
There are months that you are cash straps and you can’t pay up all your bills. You may have to pay off some bills and skip others. Avoiding a bad credit score means you must stay accurate on your bill payment and all your bills on your credit report – credit cards, Loans, mortgages, etc. It does not mean that you should ignore your other bills, any bill left unpaid will affect your credit. If you skip a bill have a concrete plan for getting to make-up.
Don’t Take on Too Much Debt
The level of your debts is another big factor that affects your credit score. The number of debts you have can also affect your payment habits. Owing too much debt can make it hard to meet your monthly payments causing you to miss payments.
Be On the Watch
Know the signs of having too much debt and reduce your credit card spending. Credit scores do not only consider the amount of debt but also how your credit card balance is compared to your credit limits (credit utilization).
Keep your credit card balances low and make your regular loan payments to reduce the amount of debt you have.
Manage Your Money Well
If you’re not good with money management, you’re likely going to get into trouble making your credit and loan payments. This will bring you bad credit. Being good with money helps you in your financial management, it keeps you out of debt, helps protect your credit score, and allows you to achieve your financial goals.
Minimize Your Credit Card Applications
For each credit card application, you apply for it adds an inquiry to your credit report. These inquiries are 10% of your credit score and can be g about a drop in your points based on the information on your credit report. Also, having plenty of credit card applications means many credit cards, lots of balances, and lots of payments to meet up.
Build a Healthy Saving Lifestyle
Having a healthy saving lifestyle does not build a credit score. Bank balances are not factored into your credit score, so saving money will not impact your credit score. Having money saved up to assist you in avoiding some financial issues that can lead to bad credit scores. Such as paying off debts and making other payments is good.
Avoid Making New Expenses
Think before making new expenses each month. We keep upgrading and adding new bills without considering, how it will affect our ability to pay all our other expenses. Take into consideration, how the new purchase will impact your monthly budget if you’re going for one.
How to Avoid Bad Credit
here are some extra tips on how to avoid bad credit and get a credit score improvement.
- Make sure to pay your bills on time each month
- Think it through before taking on new expenses
- Do not accumulate much debt
- Take note of the bills that report to the credit bureaus
- Know when you are having issues
- Build a Healthy Saving
- Be great when it comes to managing money
- Minimize your credit card applications