Your credit score is the single most important factor in determining how likely you will be accepted for a loan and the amount of interest that you will pay back. The higher that your credit score is, the lower the interest payments will be on loans, mortgages and other financial products. In today’s modern society, the economy essentially runs on credit, so it’s a very good idea to try and maintain a good credit score throughout your lifetime.
Bad credit can develop as a result of a whole different range of financial transactions. And, believe it or not, even those without any credit score at all can struggle to obtain credit when they need it. In this article, we are going to explore the different ways in which you can avoid developing a bad credit score and how to improve a bad credit score by using a bad credit loan.
Pay Your Bills In Full and On Time Each Month
We are going to start with the single most important thing you can do in order to avoid a bad credit score. And, that is paying all of your bills on time and in full each month. Your repayment history is the biggest factor that can affect your credit score. Even missing a single payment can have an adverse effect on your score and cause it to drop by a few points.
Limit The Number Of Credit Card Applications
Each time you apply for a credit card it adds a credit inquiry to your report. Credit enquiries make up 10% of your overall credit score. Apart from making lots of credit card inquiries, making these applications could result in having too many credit cards and lots of balances to keep up with.
Sometimes things can significantly change in life, which could make it hard to keep your credit score intact. This could include anything from a period of unemployment, the loss of a loved one, sickness or injury or divorce. When going through these changes, the last thing on your mind is your credit score. However, try not to worry about it too much as you can rebuild your credit score once you get yourself back on your feet. One thing that would help should this situation ever arise, is by having a savings fund in place. It can help you make payments when disaster strikes or when you are going through times of emotional stress.
Never Take On More Debt Than You Can Handle
The amount of debt that you are in is the second biggest factor that can negatively affect your credit score. The amount of debt that you are in can also adversely affect your payment habits. Being in too much debt can often make it difficult to make your monthly repayments and as a consequence miss them which further damages your credit score.
Recognise When You’re Getting into Financial Difficulty
If you are starting to struggle and money is becoming pretty tight, then it’s important not to use credit cards as a solution. It’s a much better idea to reduce your spending and work harder to get yourself out of the situation. Even if it seems selling some of your personal items, taking on an additional job or trying to make money from a hobby.
Think Carefully Before Taking On Any New Expenses
Each new expense that you take on, whether it be changing your broadband provider, buying a new car or changing your mobile phone provider will affect your ability to manage your finances. When doing so, it is important to make sure that you can still make ends meet each month. Often, we add monthly bills to our outgoings without actually considering how it will affect our ability to pay all of our other monthly bills.
Improving Your Credit Score with A Bad Credit Loan
A bad credit loan is exactly what it says on the tin. It’s a loan product that is designed for those with a bad credit score. Some bad credit lenders will run a credit check when you make an application, while others won’t run any check at all. However, do be aware that this type of loan is only going to improve your credit score if you are responsible with your repayments. Improving your credit score is still all down to you and about your ability to manage your finances and debt. Like any type of loan, the repayment process can take a long time and requires dedication.