by Lina Martinez

Everyone starts their financial journey with no credit, but as expenses expand and income refuses to increase, people fall into the trap of spending more than they earn, which eventually shows up on their credit score, making it difficult for them to seek loans to meet contingencies.

A bad credit rating can be avoided if you’re prudent with managing your finances. Here are three tips that will help you steer clear of making mistakes that could adversely affect your credit.

Maintain an impeccable payment history

The best way to keep your credit score intact is to make all your bill payments on time month on month, including utility bills, mortgage, insurance premiums and credit card payments.

Missing even a single payment can hurt your credit score. Avoid bad credit by making a habit of paying bills well before the due date and avoiding last-minute rush.

Apply this rule to even those expenses that are not normally reported to credit bureaus, such as mobile service bills or electricity bills, as each one has the potential to harm your credit (if defaulted time and again and reported to a collection agency).

Make savings a priority

People usually end up defaulting on payments when they have spent their income on other things. Sometimes, a family celebration or an adverse situation such as losing a job can leave one strapped for cash.

The best way to mitigate a cash crunch is to maintain an emergency fund. This way, you’ll not have to overspend on your credit card or take out an emergency loan. Start small if that’s what works at the moment. Even saving $30 a month could bail you out of a cash crunch six months later.

Control your credit card use

Did you know that every time you apply for a new credit card, an inquiry is generated on your credit report? While these inquiries can seem harmless, combined with other negative information on your credit report, they can bring down your credit score by several points.

Credit card inquiries constitute ten percent of your credit rating, so avoid making too many applications. Moreover, having too many credit cards is an indication that you’re likely not managing your money well and it also puts you at a greater risk of missing payment deadlines.

Learn to live within your income

Today, it’s easy to take personal loans with bad credit and use that money to deal with a financial emergency, to pay pending bills or to have the security of extra cash till your next payday. You can get a personal loan by applying online at a trusted loan company; however, take the time consider if you really need that loan.

Bad credit scores are often, though not always, an outcome of a culture of overspending. The amount of money you owe to banks and credit unions greatly affects your credit score. So, spend and borrow after careful consideration and work on reducing your debt over time.