Having a bad credit history is not a very desirable financial state, but sometimes, it cannot be avoided. Economic recessions, financial emergencies and many other reasons contribute equally towards bad credit scores. Here are a few common causes and tips on how to avoid them:
Credit card irregularities
Sometimes not using the credit card with discipline may cause credit scores to go low. These can be corrected with some minor efforts while using the card.
• Paying the bills: When there are delays in payment of bills, or when payments are missed, credit scores will automatically go down. Even if the bills are paid in partial, the credit scores can drop. But it is always a better idea to pay the minimum amount due, in case the bill amount cannot be paid completely.
• Wrong entries: Sometimes, credit card bills can be erroneous with double entries, wrong entries, or entries for cancelled purchases. These may add up to the total amount outstanding, which in turn can further harm the credit scores. The outstanding balance should always be less than the total available credit limit, or it will cause the credit scores fall. One way to eliminate this problem is to go through the monthly bills regularly, and verify every purchase made.
• New credit Cards: Applying continuously for new credit cards will decrease the scores. If applications are rejected, then credit scores will decrease. A denied application makes up a percentage of your total score.
Tips to avoid low Credit scores
Although it is very easy to land in bad credit, with some effort the situation can be completely avoided. Here are some tips that can help in avoiding the bad credit history situation:
• Planning credit card purchases in advance, helps to make bills are paid in full. While planning it is always a good idea to include extra room in the budget in case one or two unplanned purchases are needed.
• Credit reports are a way to determine if the scores are in the right direction. Reading them at least once a year and correcting the mistakes can save the day
• Auto scheduling of payments can ensure that bills are paid on time.