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It takes very little to push the credit score to low limits, but takes a long time to recover from the bad credit zone. With practice and caution, being in the bad credit zone can be totally avoidable. First of all, what does bad credit mean? Every financial activity is recorded by credit report companies, and a report is generated for every individual at regular intervals of time. Depending on the financial activities in the report, certain scores are given to every individual. If these scores are anywhere above 600†, then the credit is in good books. If the scores are as low as 300† or below, then the individual is in the bad credit zone.
It is very easy to land into bad credit zone because activities like late payment of credit card bills, or missed payments of loan accounts or even cancellation of credit cards can cause the credit scores to go low. Healthy financial habits are very necessary to avoid the bad credit zone, or even recover from it gradually.
Paying the bills in full amount is the first step to take towards a healthy financial habit. High interest credit cards charge a very high amount for the outstanding balance which can add significantly to the total amount payable every month. If the amount cannot be paid in full, it is advisable to at least pay off the minimum amount due for the month, as a missed payment is an important factor in reducing the credit score.
Planning ahead for every month's expenses can reduce the risk of falling into the bad credit zone. Purchasing only what can be paid off, is the key to managing the bills effectively. Scheduling auto payments for the phone bills or any such utility bills can also keep the credit scores from dropping. Setting up reminders before the due date of credit card bills can help a great deal if payments are missed due to forgetfulness.
Having more than one credit card can also pose problems in timely bill payments. Because of the available credit, keeping tab on expenses become difficult and so the total amount outstanding becomes difficult to handle. Utilization of all available credit can also result in a bad credit scenario, since using up to the maximum limit can lead to drop in credit scores. Using credit cards only when required is the key to achieving good scores on the credit report and completely avoiding bad credit zone.