While getting a loan or a credit card has become far easier than it used to be, people often forget how important it is to keep their debts in check. A credit score, in simple words refers to the creditworthiness of an individual and is maintained by a credit bureau. Whenever you want to take a loan or credit from a bank or a financial institution, they will check your credit reports before deciding whether your loan request will be approved or not. Hence, it has become extremely important to keep a watchful eye over your debts and payments to ensure a good credit score. Nevertheless, even if you have missed some payments or have bad debts on your credit report, there are several ways how you can raise your credit scores without being overburdened with outstanding debts. Listed below are some easy to follow, yet effective ways to maintain a healthy credit score.
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- Avoid Using Too Many Credit Cards
One of the major reasons for a bad credit score is too many credit cards and loans. While people tend to use more than one card to avail the different interest rates, shopping with too many of them will leave you confused and you might lose track of your spending. Spending small amounts and different credit cards can also hurt your credit scores as these small sized debts often get overlooked and can result in unpaid bills. For best results, make sure that you pay off all the small outstanding debts from your credit cards and use not more than 2 cards (preferably the ones with the lowest interest rates) for future payments.
- Pay Your Bills on Time
A bad debt never goes unnoticed in the credit bureaus and even the elements such as late payments and late fee charges will leave a bad impression on your credit report. Making timely payments will not only protect you from any late charges but will also ensure that you remain in the good books of your debtors. Missed payments, late fees and debt collection agencies are all the factors that contribute towards your low credit score. This can be a major problem if you’re looking forward to request a new loan for buying a house or a vehicle. Hence, it is always best to pay your outstanding bills on time to increase your credit scores.
- Avoid Paying the Minimum Balance
Paying the minimum balance sure sounds like a convenient solution to pay off your outstanding debts, but in reality, you are only making things worse for you. Payment of the minimum balance will not only accumulate more interest on your debt or loan, but will make the payoff time much longer than you expected. Thus whenever making the payments towards any outstanding credit card bills or loans, make sure that you pay more than the minimum amount to cover the interest that will be added to your account. A low outstanding balance on your credit card can totally work in your favor even though your overall credit score is low.
- Don’t Be Over Obsessed With Getting Old Debts Removed
Having a debt in your name might seem like a negative point but it can actually help you with securing loans or additional funds, if you have a good payment record. Even if you have paid off an old debt, make sure that you leave it on your credit reports instead of obsessing over getting it removed. Especially if you have made timely payments towards a particular loan, it can work as a good reference whenever you approach a bank or a financial institution for loan. Such good debts are reflective of your creditworthiness and will help you in securing additional funds more quickly.
- Check Your Credit Reports and Statements Regularly
Despite of our busy lives and schedules, it is certainly important to keep a careful eye over your credit card statements and outstanding payments. We all know that mistakes are a part and parcel of the banking world and it can happen with your credit reports and statements. Keeping a track of your spending is important so that you can dispute any mistakes that happen on your credit card bills or statements.
Missed payments and irregularities in paying off your borrowed funds certainly seems to be unavoidable in today’s world. Sadly, this can spell disaster for your credit reports and can keep you from securing any additional loans and advancements in the future. Following these simple tips can certainly help you in keeping a reputable credit score and limit the possibilities of any bad debts in the future.
