A good credit record is essential for many reasons. From taking a loan, buying a new car, or even renting a home. Significant financial plans are hinged on one’s credit score. It is high time one evaluates their financial habits if they are to improve on their credit ratings.
Here are a few actions to be cautious of if you want a good financial report.
Spending More Than Is Earned
There is a dominant false feeling of freedom provided by credit cards and payment schemes, especially when it comes to making massive purchases but have no cash to front for it. This makes it an expensive financial mindset, especially during emergencies. You’re heading for bad results if you are utilizing your credit cards for a lifestyle beyond your management.
Paying Minimum Monthly Charges
Making a low monthly payment towards credit card loan makes it easy to fall into financial traps. This habit will keep you in debt at all times and may weigh you down financially. Pay as much as is manageable towards your credit card loan. Reassess your spending habits if you are unable to pay more than the minimum fee.
Maxing out on Balance
Maxing out on your available credit card balance is one of the worst things that can happen to your credit score. This impacts your credit utilization ratio. A credit utilization ratio of less than 30% is standard for people with a good credit score. Avoid using your cards and tighten your spending habits. If you have a habit of maxing out on your available credit, try and stop. It’s a bad habit to use credit to buy things you cannot afford. It’s also a negative sign to lenders.
Co-Signing on a Loan
Situations whereby a family member or friend asks for your help financially, are challenging to turn down, though it is not advisable to co-sign on loans. This is because the status of the debt in question affects both the primary signer’s credit score and the co-signers as well. Thus one’s credit score drops if he/she co-signs on a loan or mortgage that gets defaulted, and in some cases, and may be charged for the defaulted balance.
Ignoring One’s Situation
One’s credit statements are not usually the most natural things to accept, but turning a blind eye and ignoring their existence only intensifies the debt and hinders one from attaining financial wellbeing. Apart from clueing you in your account fees, due payment dates, and spending practices, monthly statement review will also aid in detecting fraud and identity theft.
If you have any of the mentioned habits its a good idea to start fixing your problem as soon as possible.