Bad credit can negatively impact on your finances and it can hold you back in life but you shouldn’t consider bad credit as something that prevents you from achieving what you want to in life. Bad credit doesn’t have to be a permanent thing in life and there are many ways in which you can improve your credit rating. If you feel as though consumer finance is important to you, you want to make sure that you have as positive a credit rating as possible and this is why the following tips to improving your credit will be of interest and benefit to many people.
Only Borrow what you can Afford to Pay Back
One of the biggest reasons people have suffered with bad credit is because they took out credit options that they couldn’t afford to pay back. A few years ago when credit was widely available, it felt as though there were no real consequences or problems in taking out credit or finance but the nature of the world has changed considerably in recent times.
This means that there is a greater level of accountability in the finance world and this means that people need to be certain that they can pay back what they have to pay back. This means you should look to create a budget where you fully understand your income and your outgoings. This will provide you with a platform to know exactly how much money you have to spend, so if you are looking to make a sensible decision when it comes to consumer finance options, borrowing what you can afford to pay back is the best starting point.
Try and not use All of your Credit
You’ll find that taking your credit cards to the maximum level, or close to your level, is a poor decision when it comes to paying off their cards. This also sends a signal to lenders that the borrower may have problems in paying off their card or loans. If you are looking to develop a good credit score, you’ll find that remaining below 50% of your credit limit is sensible and if you really want to impact on your credit score, you should look to stay below 30% of the credit that is available to you.
Take One Card at a Time
There are findings to suggest that people who take out their first credit card often end up with a number of credit cards in a short period of time. Opening up a number of credit options in a short period of time is unwise and before too long, it is likely that you will end up having to deal with too many lines of debt.
There is also the fact that making a number of applications adds more inquiries to your credit rating and this can have a negative impact on your credit rating. You should be looking to show that you can deal with one credit card in a mature and reasoned manner before applying for additional credit cards.
Pay Off as much of your Balance as you can Each Month
You would think that making payments on time that meet the minimum payment is enough to build your credit rating but this isn’t the case. If you are looking to positively impact on your credit rating, you should be looking to make big payments that go a long way to clearing off your existing level.
If you make payments around the minimum payment level, the lenders and credit experts will see this as a sign that you are struggling to deal with debt, and this means that they will consider you to be a risk when it comes to finances. This means that meeting the minimum payments on time isn’t enough to make a positive change to your finances, so you’ll need to work harder if you want to make a real change to your credit score.
Keep Older Accounts Open
While there is something to be said for clearing off debt and closing accounts down, there is an argument that leaving older accounts open is positive because this shows you have a lengthy but positive history when it comes to credit. If you can show that you can manage credit in a mature manner, you credit rating will be positive.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.