It is often said that a stitch in time saves nine. There are a lot of credit card customers who end up in debt and large outstanding dues simply because they have been careless and reckless with their finances. Prevention is better than cure, which is why you need to follow some simple steps to avoid creating a bad credit history. Bad credit history for a customer means that he or she is not quite creditworthy from the credit card issuers perspective. This may lead to high interest rates on credit cards and loans and less rewards. Here are the 5 precautions you need to take to avoid bad credit history.
Don't miss bill payments
This is the golden rule that is often repeated when it comes to maintaining a good credit history. Whether it is your phone bill, electricity bill, internet bill, mortgages, monthly payments for loans or credit card bills, you must ensure that you don't miss the deadlines for the bill payments for any of these. Every missed bill payment affects your credit history negatively and while you casually forget the billing cycles, you might realize one fine day that your credit history, in spite of your income and expenditure and financial condition, is not as good as it should have been. A good idea is to set auto payments of most of the bills from your credit card and then keeping a reminder to pay off the credit card bills on time.
Don't push your credit limit
Most credit card companies do not give you any reminder that you are nearing your credit limit or you have crossed it. You will simply be charged with the overdraft fees, although, according to the new rules you need to sign up for this. Whatever be the case, your outstanding balance shouldn't go close to your credit limit as it doesn't augur well for your credit rating. Your dues should be as low as possible and should be cleared away every month.
Don't keep a revolving debt
It is a common temptation to spend money on something, thinking you can always pay for it next time. The average credit card debt in America is in excess of 2000 dollars. If people were wary of keeping revolving debt, this situation wouldn't have risen. Revolving debt should be best avoided to stop charging on your credit card, the moment you feel you don't have enough to pay off the bill later. That way you will save on the extra interest which you would have paid on the revolving debt.
Don't spend to avail rewards
Rewards as the term suggests are programs to reward you for your expenses and give you something as a token of appreciation. Many card issuers use it like a marketing strategy. You must not go out of your way to spend in order to avail these rewards.
Don't keep closing credit cards
A long history is important for a good credit rating. If you keep closing your credit card accounts you will lose the advantage of a long credit history.