Are you bad for credit?

not paying your bills can make you bad for credit. Paying off your bills and credit cards in a timely fashion is probably the best way to maintain a good credit score. However this is not all you can do and the surprise is that doing the opposite to this can enhance your credit score even further.

5 ways to avoid being classed as bad for credit

Bad For Credit

Some bad for credit mistakes borrowers make include:-

1. Avoiding using credit cards altogether and paying for all there goods in cash. If you do this then where is your credit history? These people may be of the opinion that a lender will see they are in good standing because they are living within there means and are responsible with no bad credit. Some may have been bad for credit in the past and by going down this root lenders will give them a good credit report. However if you pay cash for everything then you will not have a credit report that a lender can check up on. No credit history means no mortgage loans, no car loans, no—well you get the picture.

Bad credit lenders my take you on but normally they need to see how credit worthy you are and if you have handled your loans in a responsible manner. So the best way to handle this is to have some debt in the form of personal loans or the likes.

2. If you have had mortgage loans bad credit or bad credit refinance in the past you may feel like closing all your credit cards and avoiding them completely. This is an overreaction but is normal for some people who have been classed as bad for credit. Of course to some having credit cards is a license to spend but if you are sensible it would be best to keep your longest standing credit cards open. Do not hang onto credit cards that you do not use as you may be charged for inactive ones. Be sensible and only keep the ones you really need to stay on the right side of a good credit report.

3. Switching around you debt from one card to another is not the best way to go. It is better to have smaller amounts of debt on more cards and pay keep paying small amounts off rather than switching large amounts of debt around. It is however beneficial to get new credit cards while the low rate introductory offers are on but make sure you pay off the credit before the rates go up. Spreading your accounts around and paying them off regularly can be beneficial to your credit score. It is a better fix rather than having bad credit by having higher debts on a smaller amount of cards. This is because your credit utilization ration will be lower.

4. If you are thinking of purchasing a home or buying a car or other large purchase, don’t dither around. You will probably not be paying cash and will want a mortgage loan or car load to tide you over.  Do the rounds of the banks or other lenders rapidly.

The reason is if you spread out the time it is taking you to process a loan over long periods of time and with different lenders then your credit score could be damaged. This is because it can be interpreted by credit reporting bureaus that your multiple credit inquiries over long periods of time is a way of obtaining multiple credit applications rather than just searching for one loan. Over a short period of time it will indicate that you are searching for one loan which will not impact and make you bad for credit.

Different lenders could use either the old or new FICO formula for credit scoring; the older version uses a 14 day window to group together all inquiries, while the new scoring formula takes all inquiries falling within a 45-day period as one inquiry. To play it safe and ensure that seeking a loan isn’t hurting your credit score; try to obtain your loan within a two week period.

5. Never close a credit card with an outstanding balance. Your available credit will decrease to $0. The remaining balance will make it appear as if you’ve maxed out your card, another bad credit mark against you.

Bad for credit conclusion

The formulas used by the credit reporting bureaus mean what appears to be a good move on your part is in fact harmful to your credit rating. Knowing a little on how your credit history is reviewed can go a long way to stop you being marked as bad for credit.

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