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Bad credit history could be the result of some irresponsible credit card spending, missing payment deadlines and allowing outstanding balances to grow beyond a limit where you can pay them off. Bad credit history is largely responsible for the decreasing credit line that is accessible to you and unless you do something about it, the slide you take cannot be controlled. Here are some of the things you should avoid doing, though, when you have a bad credit history.
Closing your credit card accounts
Having a credit history is always better than no credit history at all. There are many credit card issuers which will grant you balance transfer cards with 0% introductory APR, but that doesn't mean you close your existing accounts. The moment you close your existing credit card accounts, you lose whatever credit line you have accessibility too, and have to start from scratching. Closing the accounts is a bad way of trying to repair credit history.
Reduce your credit limit
Transferring your balance to another card is a good option as long as you don't close your old account and the new card adds to your credit limit. If your new credit card limit is less than the older account you have and you close it, the ratio of your outstanding balance to available credit reduces. This ration known as credit utilization ratio is important for a good credit rating. Hence it should be your primary aim to keep your credit limit as high as possible and your outstanding balance comparatively as low as possible.
Declaring bankruptcy
Bankruptcy is one of the things that remain in your credit history for a longer period of time than any other negative marks like missing bill payments or defaulting on loans. Credit bureaus can keep pulling it out for as many as 10 years, which means you would find it difficult to get credit for a long period. Therefore trying to work a way out of your debts by paying them off or by negotiating a reasonable amount with the credit card companies or lenders is a better way, although what the lenders report to the bureaus is still up to their own discretion.
Missing bill payments
Negotiating with the credit card companies for a minimum bill payment scheme is a good option instead of being confused over how much to pay to the credit card companies every month. Missing the monthly bill payment deadlines, at a time when your credit history is already bad, will push you further into the hole, and consistency is very important. In fact, as per the new reforms, by consistently paying the bills on time for 6 months, would allow you to get back to the older credit card interests, in case your credit card issuer has hiked the interest rate due to their consistent late payments.
Spending extravagantly
It is a no-brainer that when you cannot spend extravagantly when your credit rating is low. Instead every penny should be spent in paying off debts and some extra amount too, is possible.
