While owning a credit card is very beneficial, not using it appropriately always puts an individual in debt. The pressures of managing debts aside, the individual will immediately fall into the bad books of credit history. This is not an ideal financial situation and can pose many problems and make financial dealings very difficult. Understanding what are the important causes of bad credit history and how each and every financial activity will add up to the credit score will help the individual manage their credit scores better.
The first step towards understanding the credit history would be to get a credit report to analyze your pattern of spending. Reviewing your credit history at least once a year is mandatory because you can correct any mistakes that are on your credit score report. There may be errors in entries like missed entries, extra entries or wrong entries of purchases that were not made. The individual is allowed to notify the credit card companies and correct the errors on their credit scores. Sometimes, this alone will increase your credit score so that individual need not worry about extra measures to correct the credit score report.
If there are no errors on the credit scores, then analyzing your spending pattern to control unwanted spending is the next step towards a better credit score. There are several activities that can hurt the credit history and cause the scores to plummet down.
Irregular payment habits: paying the bills is not sufficient to keep the credit history good. Paying them on time is very necessary. Often, because the billing cycle dates are easily forgotten, the bills are paid two days late or even a day late. This little irregularity can cause negative effect on your credit history, along with late payment fees or interest rates on the balance due. To avoid this, scheduling for an auto payment if possible, is a good idea. If not setting reminders and paying the bill well within the due date is important.
Partial payment or non-payment: if for any reason the credit card bill cannot be paid for a month, then talking with the credit card company, so that it is not reported can be a good idea. However, any payments in partial or not paying the bills can cause credit scores to go very low. Moreover, it is always advisable to pay at least the minimum amount due, to stop the credit scores from going further down.
Credit limitations: using the credit card up to the available credit limit can sometimes cause the credit scores to go low. It is always advisable to use only up to 50% of the total available credit limit. This will prevent the damage to your credit history and makes it easier to pay the bills at the same time. Exceeding credit limits not only adds penalties to the monthly bills, but also adds negative points to the credit scores.
Taking care to avoid unnecessary spending and planning every month’s expenses in advance helps to manage finances without landing in debt. This will take care of the credit scores without the individual having to make extra effort.