Poor credit doesn’t happen overnight, but rather, it comes as a result of a string of poor decisions when it comes to your finances. If you suffer from bad credit, know someone who do, or are in the road of getting there yourself, remember these traits that typically cause bad credit and avoid them at all costs.
Relying on Credit Cards
Having too many credit cards in your wallet can be downright dangerous, like in the case of theft. There’ll be more work to do and more banks to notify. Additionally, if you find yourself relying on plastics to purchase basic needs, perhaps you have to check where you are financially. If you can’t afford to pay for basic necessities in cash, you surely are on the way to a huge credit problem.
Making Credit Card Cash Advances
Whenever you have to swipe your credit card at a nearby ATM each time your savings runs dry is a clear sign that you cannot manage your credit and that you’re struggling to make ends meet. Relying on cash advances can be very expensive. Just think about all the interests you could’ve saved instead. Furthermore, if you fail to make a payment, this snowballs into a larger debt and can hurt your credit score significantly.
Ignoring Your Bills
If you find yourself not bothering at all on whether or not you’re paying on time and in full, this probably means you’ve stopped caring about the consequences on your credit.
Not Having a Financial Plan
One of the most common reasons we struggle to manage our money is because we do not have a solid plan. It all starts with setting up a budget and tracking where the cash goes. A month or two of consistently listing down your expenditures is usually enough to realise where you spend your money, and by there you can start making tweaks. It’s either you limit your spending on some or all categories, or find another income source, at least until you’re back on your feet again.
Not Having an Emergency Fund
Many cases of bad credit rating have stemmed from lacking an emergency fund. Without a rainy day fund, a sudden misfortune, such as loss of job or illness can suddenly seem like the world has crushed down on you. While an emergency fund may not solve all the sudden financial problems, having it could help make things a lot easier because at least you won’t have to borrow as much, or may not need to borrow at all!