Financial Advice: Tips To Avoid Bad Credit Mistakes

It can be easy to get bad credit. Here are some financial tips on things to do and avoid to keep your credit good while preventing negative credit ratings and scores.

It can be easy to get bad credit, and to continue to have it.Here are some things to do to keep your credit good and your financial life less stressful.

Pay bills on time.This may seem obvious, but it is the one thing too many people overlook in their financial life.Paying bills on time helps you avoid late fees and interest rate hikes.It also helps keep your credit record clean.

Keep the portion of your income that goes to repay debt to under 35%.This includes payments for housing and transportation.The more of your income which goes to debt service, the less you have for other items such as food and clothing.You will also not have money for savings, or to handle an emergency such as an unexpected car repair.It can lead to a cycle of charging items because you don't have the cash to pay for them, having higher payments, and then having even less money for necessities and emergencies.

Don't pay for consumable items, such as food or movie tickets, on credit if you carry a balance on your credit card.That $50 dinner out could end up costing you $100 by the time you pay it off.

Pay more than the minimum due on credit card bills. The interest really piles up if all you pay every month is the minimum.For example, if you have a card with a $1,200 balance at 15.9%, and you only pay the minimum payment of $24, it will take you almost seven years to pay off the card.The interest charges will be about $780 - almost two-thirds of the original balance.Merely doubling the payment to $48 each month will almost half the time it take to pay off the bill, and will reduce interest charges to about $270.

Transferring balances from one credit card to a new card because it has a lower interest rate will only help your credit if you are disciplined about paying off the new card, and if you do not run up a balance on the old card.You could end up with a higher balance than before the transfer, with even more interest charges.Watch out for the time limitations some cards have on the introductory interest rate.If you do not pay off the balance on the new card by the end of the period for the introductory rate, you might end up paying more in interest than if you had never transferred the balance.

If you have an emergency and cannot pay a bill that month, or must pay less than the minimum, contact your creditor immediately and explain the situation to them.Tell the creditor when you will be able to pay them and how much.Then stick to what you have said.Most creditors will be understanding, especially if you are a customer who has always paid your bill on time.They may even offer to waive payments for a short period of time; however, if they do this be aware that interest will continue to compound on the debt.

If a bill goes to collection, negotiate with the collectors to create a workable payment plan.Be courteous and forthright with them.It is best to carry on all communications with collectors in writing, as then you will have documentation of all negotiations.This could be especially important if you have to go to court over the debt later.

Check your credit report every year or two, or before you plan to make a major purchase such as a house.Currently, you are entitled to a free credit report if you have been denied credit for any reason within the last 60 days.You are also entitled to one free credit report a year if you are on welfare, unemployed and plan to look for a job within the next 60 days, or your report is inaccurate because of fraud.By the end of 2005 everyone in the United States will be able to get one free copy of their credit report each year through a central clearinghouse.

When you check your credit report, look for inaccurate information, such as payments being incorrectly reported late or an incorrect address.Activity on the report that you do not recognize could be a sign of fraud or identity theft, and you should notify the creditor and the credit bureaus of such activity as soon as possible.If there is erroneous information in the report, write to the credit bureaus including documentation of your case, and ask that the information be corrected.Do not send original documents to the credit bureau.The three major bureaus are Equifax, Experian, and Transunion.You do not need a credit repair company to do this; in fact, the credit bureaus may refuse to deal with some credit repair companies unless they have a signed release from you, delaying your efforts to correct the inaccurate items.

Do not believe a credit repair company if it advertises that it can remove all negative items from your credit report.If the item is timely and accurate, it cannot be removed.Most negative information stays on your credit report for seven years; some items, such as bankruptcies stay on even longer.Generally, a credit repair company cannot do much more than you can do yourself to clear your credit record of erroneous items.

If you must get help resolving credit issues, there are many non-profit organizations that counsel consumers in debt.For little or no cost to you, they will help you set up payment plans that are acceptable to you and to your creditors.They will also help you set up a workable budget, so that you will not fall back into debt.

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