06 Oct 2020, Author:

No matter how much money you have and how rich you are, you need to have a good credit history if you want to have a healthy financial plan. It is important, if you don’t want to have any kind of financial stress. However, there are certain mistakes and bad habits that can seriously hurt your credit score.

Above all, if you don’t deal with these bad habits, they can lead you into debt, and we all know that it is a slippery slope. Therefore, if you don’t want to destabilise your future financial plans, then you need to make sure that you say a final goodbye to all the habits that are affecting your credit score and taking you into a pile of debt slowly. 

In this post, I’ve narrowed down some bad habits that you’ve potentially been following, without knowing that they are hurting your credit score. You’ll also find out how you can avoid them to ensure that you don’t have any kind of bad credit under your name. 

So, here is everything you need to know: 


You Always Pay the Minimum on Your Credit Card

We all know that banks and credit card issuers work for a profit. It means that whatever policy they’ll make, it is going to profit them one way or another, in the disguise of making it easy for you to pay your loans. Due to this basic reason, usually, the minimum payment on your credit card is usually just one or two percent of your overall balance. 

No doubt, this looks like an opportunity, and it is the reason people are drawn to pay the minimum on their credit card limit because this way, you have the illusion of paying less. However, this is where some people are completely wrong. The reason behind keeping the low payments, encourages the customers to pay more interest. 

You may think that it is only going to cost you a little more money, and that is no big deal. But, again, you are wrong. Paying minimum credit each month can seriously affect your credit score. This happens because when you are paying the minimum payment, you are ratcheting up your credit utilisation. Hence, your credit utilisation factor ultimately increases, which finally ends up in the form of bad credit score. 

Therefore, it is important that you should pay your entire balance each month. But, if that’s difficult for you, then you can either contact guarantor loans lenders or try to pay as much as you can every month.


You Don’t Care About an Emergency Fund 

There is no denying the fact that life is unpredictable, and anything can happen any second of the day. For example, you may think that you have everything figured out finances wise, but what if your car breaks down or your heater starts leaking? You are obviously going to need a lot of money to get them fixed. This is where you are going to need an emergency fund. 

Therefore, it is important you create an emergency fund because if you have don’t have any kind of money cushion to deal with your urgent financial needs, then you’ll potentially go with the option of taking more loans in the form of a personal loan or, worst, you may open a new account to get more credit. Both of these alternatives are going to hurt your credit score, and you may not be able to get any kind of loan for a really long time.

That is why it is important that you create an emergency fund right now and make sure that you always have enough money saved to deal with any kind of emergency that comes up. However, if your emergency fund is still not enough, then get loans now from a reliable lender. 


Making a Budget and Following it is Beyond You 

If you don’t have a habit of making a monthly budget, then you might as well forget about improving your credit score. One of the most common reasons that lead people into a debt crisis and bad credit score is that they don’t pay attention to managing their finances by making a budget. This way, they tend to spend more than they earn and end up taking huge loans.

Creating a budget and sticking to it, is not only going to enable you to save a lot of money, but it’ll also bring discipline in your life. Indeed, you are going to have a hard time creating a budget and following it because you may have to cut some expenses. But, with time, you’ll get used to it, and there will come a time when you’ll have a really good credit score and worrying about managing your finances will be a thing of the past.


You Casually Miss Your Payments 

No matter how we try to keep track of things, sometimes we end up forgetting the most important of the things in our life because life can be a little too hectic at times. However, if you forget about your payments, then you may have to face the consequences in the form of a bad credit score. 

Forgetting about your payments for a day or two may not be a big deal at first, but if you skip your payment for more than 90 days, then it is going to affect your credit score really badly. 


Do You Check Your Credit Score and Report More Often?

Not checking your credit score is going to affect your credit score negatively. It is important because a person can’t keep a record of all their spending and finances when they have multiple credit cards. Therefore, more often than not, you end up using your credit more than you should. It gets even worse when you don’t keep track of your credit score report and keep on spending like crazy. 

You only realise that you have a bad credit score only when it is too late! Therefore, it is important to keep checking your credit score report more often.