A lifetime of bad credit is something that hangs over many of our heads, but in reality as long as you make smart decisions with your spending, bad credit should be a far off fear.
If, on the other hand, you aren’t a smart spender, 5 years is a long time to suffer in bad credit limbo. A negative credit score is essentially a jail sentence for a crime you didn’t intend on committing. That is the very avoidable catch of a credit loan, which can unfortunately turn into default payments and a bad credit rating.
A credit report will list all defaults for 5 years and court writs, judgements, bankruptcies and clear outs recorded for seven years. Try to always be ahead of the pack by following these handy hints.
Have an active account
If you don’t have any form of credit history, how will lenders know that you are a reliable investment? Being a responsible borrower is on the top of a lender’s list, so confirmation of your ability to commit to payments on time is ideal.
By keeping credit accounts active and paid on time, automatically puts you into the low risk category when applying for a loan. By starting off with a mobile phone plan or internet account you will be able to ensure that both your credit account is active and that they are easily maintained payments. Starting off with a huge car loan may give you a rude awakening.
Pay your bills on time
Everything gets recorded on your credit account, so make a habit of paying your bills on time. Whether it be your electricity bill, phone plan or a pay TV luxury, always remember to keep them up-to-date and paid in full on time.
By implementing a calendar payment plan and hanging it in plain sight, you will be able to remember when your next payment is due and keep on top of all things bills. This will then give a better chance for a future loan.
Limit credit applications
The general rule of thumb is you should only ever apply for credit when you are confident you will be approved. Credit enquiries are usually recorded on your credit report and when these begin to build up, lenders start to assume that you are desperate for credit. This then further suggests that you do not handle your finances well and puts you into the high risk category.
Be smart about your applications and if rejected, wait a few years before applying again. This will show creditors that you are responsible and ready to be considered again.
A stable life = a good investment. Try to limit your change of address and job, so you are not perceived as an unreliable candidate for a loan. Frequent change of address and job may not directly affect your credit rating, but as most loan applications are examined with a fine-tooth comb these instabilities could sound alarm bells.
Always spend responsibly
Smart spending behaviours tend to be an issue for many people who are in the position of needing a loan. Always pay your bills on time and use credit responsibly and these will reflect well on you and the potential for loan approval.
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