Building a good credit standing or rating is essential to your financial planning, as it can affect your ability to borrow money or access other financial products such as credit cards or loans. However, there are some unhealthy money habits you’ll need to get rid of to avoid hurting your credit standing.
There are several financial tools you can use to monitor or check your credit score for free to see if it’s in good shape. To improve your rating, here are some poor financial habits you must do away with.
- Skipping or Making Late Payments
We know, it’s never easy trying to get all of life’s affairs in the perfect shape or balance all of the time and occasionally you may forget to pay off certain debts, especially if you have multiple credit accounts. However, missing or making late payments by just a single day or two can attract a penalty. Although, this may have no initial effect on your credit, if you have uncleared debt for more than 30 days it can hurt your credit standing. And it gets even worse if it goes on and on to 60 or 90 days.
Note that a late or missed payment stays on your credit reports for seven years. To avoid a credit dent like that, it’s best to set up automatic reminders or payments, so you never forget to pay your bills when they are due. Paying your bills on time proves to your lenders that you are good at managing your finances.
- Failing to Budget
One of the first signs of wealthy and financially astute people is that they make budgeting a core part their lives. Without a budget, you’ll struggle to build an emergency fund, especially if your savings are simply what you have as leftover at the end of the month. In addition, failing to budget makes it easier for you to become a spendthrift, which will likely make you to fall back on your credit card to get by. This creates a vicious cycle of unnecessary and unprofitable debt and financial crisis for you.
While many people find creating a budget a difficult task, it is actually something you can develop gradually as a habit. Start small until you get used to the idea. Soon you’ll see how much of a help it is to your financial goals.
- Failing to Check Your Credit Score and Report
Make sure to keep an eye on your credit card score along with making sure to choose a credit card that gives you a lot more, such as low interest rates or even cashback on purchases. Another great thing to look out for when choosing a card is if it offers a banking app along with it. Keeping a track of your spending habits using a smart app saves you a lot of time trying to keep track of your every purchase; some banking apps will automatically save a certain amount monthly for you, track where exactly your money is going and even make projections for your finances based on your current spending habits.
- Not Clearing Current Huge Debts
Ideally, you should pay off all outstanding debts before applying for new credit. This is because banks, lenders, mortgage and credit card companies might be hesitant to give you credit if you’re yet to pay off a great chunk of your current debt.
- Moving Home Constantly
Lenders are more comfortable if they have proof that you’ve lived at one address for a considerable time. Moving home a lot is certainly not a good record on your credit report and can suggest your life is unstable or that you are trying to avoid debt collectors.