How to avoid getting a bad credit score

Good credit takes a long time to build, but only takes a few little mistakes to damage. It’s often something we don’t worry about until it’s too late but having a bad credit score can seriously affect your lifestyle. Your credit score is referred to when applying for a mortgage, an auto loan, a credit card, and some employer’s even check it before offering jobs!
So how do we make the right financial choices to avoid a bad credit score? Here are five tips to help you maintain perfect credit:

  1. Pay your bills on time every time! – This is the most important commandment of credit, and the simplest way to avoid damaging your credit. Punctuality in payments should be your main priority, and it’s far more beneficial to pay all of them as soon as you can, than to prioritise some over others.
  2. Don’t get too close to your credit limit – A percentage of your score is based on the ratio of credit available versus your actual debt. So even if you’re meeting your regular payments, your credit will still be impacted if your credit is maxed out. Try not to exceed 50% of your limit and make extra payments whenever you can.
  3. Pay more than the minimum amount required – This shows lenders you’re financially capable of repaying your loan without issues. Your credit score will reflect this should you need to apply for more credit. If you’re struggling to pay more than the minimum, take it as a warning and watch your spending.
  4. Keep those zero balance credit cards and use them occasionally – A strange fact about our credit system is that having paid off a credit card, or closing an account can actually be damaging to your credit score. If you have a credit card that has a zero balance continuing to use it actually reflects well on your credit score. No debt is effectively bad debt in the eyes of lenders, having debt and managing it shows you have self-control over your limit and are capable of repaying.
  5. Don’t apply for too many open lines of credit at once – Applying for a whole lot of different lines of credit will have lenders wondering if your financial situation has gone over your head to require such assistance. Every time you apply, an inquiry is done into your credit and these inquiries can actually damage your credit score too. It’s better to ask a current lender to consider increasing your limit, which could in fact reflect well on your credit, instead of putting your current credit score at risk.

By following a few simple steps, you can avoid bad credit, maintain a perfect score and hopefully save some money while you’re at it!