Coming out of a bad credit history can be a difficult phase, but it is quite possible if credit card
customers have a proper plan and implement it with the right attitude and discipline. Along with picking up some good habits, credit card customers with a bad credit history should avoid certain bad habits or one-off actions, which could drag them down.
Don't close an account
If you have a bad credit history, the last thing you want to do is close an account. That will lead to your losing the entire history, reducing your credit score further. There are various strategies to negate the adverse affects of a bad credit history and improve it, but you need to keep your credit card account alive. This holds true even when you are going for a balance transfer
or another low interest rate credit card. It is difficult to manage multiple credit cards, but it is also important to keep your history safe and intact. You will lose all your expenditure history if you close the card or surrender it.
Don't go for a lower credit limit card
Some credit card customers try to move to a credit card with a lower credit limit, in order to reduce their spending. To be honest, you need to come up with a better strategy to eliminate your outstanding debt rather than just reducing your credit limit. This is because the credit score calculation depends on the way you are utilizing your credit. If your outstanding balance is very close to the credit limit, then your credit score will be lower. It is good to have a high credit limit and a lower outstanding balance.
Don't chase rewards
Rewards on credit cards
are for those who have excellent credit and are looking to make an extra saving. However, those who are having a bad credit history should get the basics right. This involves making the minimum payments consistently, keeping the expenses on the credit card to a minimum and to try and reduce the debt as much as possible. Chasing rewards could lead to adding more debt, sometimes more than what you are capable of paying off. Most rewards are designed strategically to tempt the credit card customers into greater spending and it is important to learn to identify and avoid falling into that trap.
Don't apply for more credit
Applying for more credit only shows you are desperate for credit. Every time you apply for a credit card
and get rejected, your credit history will be adversely affected. More importantly, the next time you apply for a credit card or loan, the company would try to focus on how many times you have been rejected thus affecting your chances of getting good terms too. Therefore, while you are recovering from bad credit history, you need to be disciplined and make your payments consistently rather than looking for new credit cards to pay off the old debt, which is a bad idea and increases the interest even more.