How to Effectively Avoid Bad Credit

Whether you plan to apply for a home, auto loan or a mobile phone contract in the future, the most important thing to remember is your credit score. You need a good credit score to ensure approval is guaranteed. But how exactly do you maintain and ensure that your score is always in the right side of things? Below are some of the ways to effectively prevent your credit score from going bad:

Pay your bills on time

A large part of your credit score is attributed to your payment history. To make sure that you maintain your good credit score, you need to commit to pay your bills on time and consistently. This includes credit card bills, utility bills as well as other liabilities you need to pay for every month.

To help manage your due dates well, you may want to set-up monthly reminders or you may want to set-up an automatic debit deduction for fixed bills and fees. Remember that a day or two of delay can wreak havoc on your credit score so it's best to cover all your grounds.

Use credit cards with caution

If you rely too heavily on your credit cards for groceries, shopping and practically most of your purchases, you may want to reconsider things. The trick to maintaining a good credit score is to make sure that you don't let your credit card balance get too close to your limit. For example, if your credit card limit is £10,000, don't let your charges to reach £9,000. In fact, it is recommended to keep your charges to around 30% or less of your available credit.

Pay your credit card bills in full

Other than keeping your balance low, you also need to make sure that you always pay your credit card bills in full. If you keep paying only the minimum payments month after month, you'll only end up incurring higher interest over time. Keep it manageable and balanced by not allowing your balance to get too close to the card limit then pay whatever charges you've incurred for the month in full.

Avoid Debt

Also a great way to avoid getting a bad credit score is to avoid debt altogether as much as you can. Debt in any form may mean bad news for your credit rating especially if the amount is excessive. If you must get into debt, make sure it matches your needs and financial circumstance. Credit agencies want to know that you can manage your liabilities comfortably. In that sense, make sure you borrow only what you need and what you can pay for.