Best Borrower Tips to Avoid Bad Credit

In this day and age, it cannot be denied that credit is a big part of the society. In fact, building good credit history can be very advantageous for an individual with regards to financial matters. In this article, we will discuss how you can manage good debts effectively and how you can avoid bad debts.

On Mortgages

When applying for a housing loan, most banks will offer an amount equivalent to 30% – 35% of your monthly earnings. As a borrower what should you do? Some people may be tempted to borrow the full amount of mortgage available to them. However, even if you can easily qualify for a bigger loan because of your good credit history, always consider the long term effects of your decision.

Needless to say, taking out a higher mortgage would also mean higher monthly payments. Will you be able to keep up with your mortgage repayment until the end of your loan’s term? Of course, no one can say for sure that you will always have the same financial stability you’re enjoying now. Unforeseen events can suddenly put things out of balance such as an unexpected loss of job or a decrease in your salary rate.

Financial specialists recommend not borrowing a mortgage loan that is more than 20% of your monthly income. If you still can afford to pay 10% to 15% higher from your earnings, it’s best to put in your bank or savings.

On Credit Card Debt

When it comes to using credit cards, the cardholders are always the one at risk. Keep in mind that you only win or benefit from your credit card if you can pay off your balance before your due date of payment. Otherwise, it is your credit card issuer that makes money out of you by charging interest rates and sometimes late penalties if you fail to submit on schedule.

Some financial experts advise that cardholders should as much as possible avoid charging any purchase to their credit cards. Unfortunately, a lot of people fall into the trap of overspending thinking that the more they charge to their cash back card, the more rewards they can. While it may be true, it can be a very risky move.

If you want to keep your card active, use it to pay down your utilities such as electricity, cable, telephone bills, etc. Nevertheless, you need to be very careful in using this strategy. Be sure that you can pay off your credit card the day you charge your bills or you can arrange automatic payment with your bank to avoid delays.

 

About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website EZCreditRepairSolutions.com. She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2011

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