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Bad credit history can often spell a doom for an individual. In today's world a lot depends on the credit history of a person, and a bad credit history will only stamp you as not creditworthy. This means you will find it very hard to find a line of credit and when you do, the charges that will be levied on you will be exorbitant. This is why it is up to you to avoid bad credit history in all ways possible. Here are some of the ways in which you will end up with bad credit history, and hence should be avoided.
Inconsistency in bill payments
If you do not pay your bill amounts regularly before the due date, you will not be considered creditworthy and your credit score will take a hit. The obvious explanation is that when one cannot be sure when the monthly payment of the money that you had borrowed will come, you cannot be considered creditworthy any more. The other thing that follows from inconsistency in your bill payments is that you will be charged with late fees which could be high enough to add more woes to your outstanding balance. As it builds up, so will the excuses of the credit card issuer to increase your interest rate as penalty for your inconsistency.
Maxing credit cards
Every individual based on his or her credit score, past records and source of income is approve a credit limit, beyond which they cannot spend through the credit card and if they do they will be charged with an overdraft fees. Hitting the credit limit is called maxing out your credit card and when you do it quite often, your credit rating will suffer and your credit history will get worse.
High Utilization of credit
If you always have outstanding dues on your credit card which are very close in total to the credit limits, your credit rating will go down. Lower the utilization of the credit, better will be your credit score and vice-versa.
Closing out your credit cards and accounts or frequent balance transfers
If you keep closing your credit card accounts, you will never allow a credit history to build. So when credit bureaus try to get your credit history, the duration wouldn't be satisfactory, making it very difficult for the credit card companies and the banks providing loans to trust you. No credit history is worse than having a bad credit history in most cases.
Bankruptcy
One thing that massively damages your credit history and stays on your record for a long time is a bankruptcy or defaulting on a loan. In both the cases, your credit rating will hit rock bottom making it impossible to get any sort of credit from any lender. The obvious reason is that you, because of defaulting and bankruptcy, are a very risky prospective. Lenders willing to lend you money will do so at astronomical interest rates which you will not be able to afford at all.
