Avoiding credit problems

In today’s modern world, credit is a reality. Unfortunately, there are many unscrupulous lenders out there that will give you credit with punitive terms. This can lead to massive budget problems down the line.

Credit is a necessity, but managing it properly means that it can become an asset, not a hindrance or liability.

In this article, we are going to look at ways that you can use credit effectively, avoiding things that may affect your credit record negatively.

Minimum amount payments

All forms of credit, be it a loan or a personal credit card, will require a monthly payment. Although it is very tempting to just pay this amount, try to pay a few pounds more. It need not be too much (depending on the minimum amount), but this will put your credit rating in good stead and help you pay off the credit at a faster rate.

Missing payments

Never miss a payment! By missing a payment you are lowering your credit score. Lenders see this as an indicator that you are having financial troubles and they may desist from lending you money in the future.

Close any cards or loans you do not use

Having many loans or credit cards open, even if they are paid for, does not help your credit rating. Once a loan has been paid off, close it. It is always tempting to leave them open, ready for that emergency, but in all honesty, you can secure a new loan quickly should you need it. Keeping one open is acceptable should you wish to.

Multiple applications

Should you require a loan, begin by applying at one institution at a time. If you make multiple applications, this will appear on your credit report and is often viewed in a negative light, almost like you are desperate for credit. It will also lower your credit score.

Track spending

It is amazing where we spend our money. Often, a few days after payday we wonder where it disappeared to. By keeping a spending diary you can begin to see areas where you waste money. This is a brilliant way to curb spending and start to find some cash to allocate to savings or even pay into an existing loan. Consider downloading a budget app for your mobile phone. They are not only a great way to track spending, but can be used to setup effective budgets that can be followed on a daily basis.

Follow your credit score

It is always nice to know where you stand when it comes to your credit score. Luckily, this is fairly easy to determine with a number of companies offering free credit score reports. You can access this once per year for free. Credit reports will also show you any payments you have missed.

Read the fine print

Every credit agreement comes with terms and conditions. Make sure you carefully read these as they may include penalties for late payments. Remember, once a loan is signed, it is a binding contract, so you will be obligated to pay the late fees should you miss a payment date.

By following these simple rules, you can help to influence your credit score in a positive way, ensuring that, when the time comes, you will be able to secure the loan you need.