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A credit history is a treasure that you have to keep building over years. If you ruin your credit history, you will find it really difficult to rebuild it. Having no credit history is much better than having a bad credit history. A black mark on your history stays on your record for eight years. Those whom have the best credit records are those who make regular payments without default. We shall now discuss a few things that you must avoid at all cost.
Missing out on payments are dangerous. Having an outstanding debt is okay. However it’s imperative to make the monthly minimum payments in order to avoid having to pay a penalty. If you miss a payment, your credit rating will go down. Making regular payments within the grace period however, will allow you to maintain a strong credit history.
Defaulting on loans is a major cause for a bad credit history. This default will tarnish your credit history for a very long time. Getting rid of this will require strategic deployment on your part. Being unable to pay off the loan that you have taken from the lender, it’s recommended that you should try to reach a settlement to ensure that the lender does not report to the credit bureaus. However, you need to get concrete assurances from the lender, before you commit to the settlement as it can become hard to control them later.
Filing for bankruptcy is a major default. It may be a very attractive option especially if you do not have any other exit strategy. A bankruptcy is the worst nightmare on your credit record. It can stay on the record for seven years. During those seven years you will not be able to acquire a loan to even buy a bicycle because of the lack of credit worthiness.
Many balance transfers are also caused by the lack of a good credit history. You might be encouraged however, to go for balance transfers, or zero percent interest rate credit cards, but you need to realize that if you do this often, your credit history will be badly affected. Closing your old accounts will also reduce your credit score as this will reduce your credit limits. A balance transfer will give you time to rebuild your finances, this option however, should not be utilized too many times as this will reflect poor budgeting. This can give you a lot of problems in future.