We all want to avoid bad credit rating because a pristine credit history can guarantee a bank loan. One will not have difficulties securing a loan if he’s confident about his credit score. However, people with poor credit rating can only resort to quick loans that usually have higher interest rates. Here are some suggestions to avoid bad credit rating.

How to avoid bad credit rating

Stick to your budget. Prioritise your basic needs over your wants.  To determine your budget, deduct your monthly expenses from your monthly salary and from the total amount set aside money for unexpected occurrences such as illness, car repair, or job layoffs. You don’t run the risk of resorting to quick loans if you have cash on hand during emergencies. Sticking to your budget also prevents excessive use of credit cards that only bring you unnecessary expenses.

Know your priorities. Prioritise your bills and credit immediately after you receive your salary. As much as possible set a fixed day after payday when paying your bills and credit. It’s preferred to settle them after payday than before it to assure you have enough funds while waiting for the next payday. A missed payment can hurt your credit history and might result in a decreased credit score.

Minimise recurring expenses. Recurring expenses such as magazine and multiple phone subscriptions are small expenses that when combined can amount to a lot of money. Consistently failing to pay for these commitments on time will reflect in your credit history. If you’re using a credit card to pay for them, it’s advisable to pay on a monthly basis as oppose to locking yourself in a one-year commitment. This gives you total control on how much you’re willing to spend on a monthly basis and avoid bad credit rating in case you cannot keep up with a long-term commitment.

Stay in touch with creditors. Let creditors know in advance about possible late payment. There’s a high chance your creditor will allow you to make loan payments after the due date for as long as they’re informed in advance.  By preventing loan defaults you can avoid bad credit rating.

Know your credit score. Be aware of your present credit score since you can obtain your credit report for free from authorized agencies. By being aware, it allows you to pinpoint the cause of poor credit rating, you can then take suitable actions to improve your credit score.

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