Avoiding Bad Credit Scores

Your credit score is a very important number; it determines how much credit you can get, and it also determines the amount of interest you will pay over time. The average person with poor credit will end up paying $200,000 more in interest charges over their lifetime. That three-digit number is a key part of your total financial health. Thankfully, there are a few steps you can take to avoid a bad credit score, which we will discuss here.

*The most important aspect in calculating your credit score is your credit history. Credit card companies and lenders like to see people who pay their bills on time every month. To avoid bad credit scores and build a good credit history, pay all your bills (rent/mortgage, utilities, car payments, insurance) by their due dates each month.

*To avoid damage to your credit score, keep a low credit balance. A good rule of thumb is to keep your balance below thirty percent of your available credit. Your debt-to-income ratio is used in determining your credit score, and also the amount of credit you will get. If you exceed the 30% threshold, your score will decrease, and if you lower your debt, it will similarly improve.

*Opening new lines of credit can also negatively affect your credit score, as can excessive credit inquiries within a short amount of time. You should only open a new line of credit when it's completely necessary, as new accounts will augment your available credit and raise your debt-to-income ratio and thereby lower your credit score.

*Avoiding bad credit scores also means checking your credit history regularly. If, during one of these checks, you find any errors on your report, dispute them with the appropriate credit bureau and have the charges removed. There might be things on your credit report that are damaging your score, and you may not even know it. By law, you are entitled to one free credit report, per bureau, per year.

*Paying your debts as soon as possible is another way to avoid a bad credit score. When drawing up a repayment schedule, start with your highest-interest accounts first, such as credit cards. Work your way down to the lower-interest accounts, such as home mortgages and auto loans.

Like it or not, your credit score is very important in determining whether you can get a loan for a home or an automobile, or a credit card. Your credit score can even be the deciding factor in whether or not you get a new job. Avoiding bad credit traps can help you get lower rates on loans, and get the job and home you've been hoping for.