Our spending habits and financial planning, more than anything else, determine whether we will be trapped in bad debt or have a good credit rating. Most people can avoid bad debts by following these simple rules.
Pay bills on time
Payment history is an important element that affects your credit history. Hence, you need to be aware of bills that you are required to pay every month and diligently pay them on time. If you have missed any payment for 30 days or more, it can have a devastating effect on your credit score. A single late payment can bring your credit score down by several points and if there are several consecutive late payments, you need to prepare yourself for worse things like repossession, foreclosure, collections, and charge-offs.
This also applies to accounts like your mobile phone bills or electricity bills that are not usually reported to the credit bureaus. If you fall too far behind in payment of utility bills, your account may get transferred to a collection agency and that will get listed on your credit score.
Do not take too many loans
Taking quick cash loans in Singapore might be the easiest way to deal with tough financial situations but do not make a habit of taking fast cash loans every now and then. When you have many debts, it is difficult to make repayment of each loan every month and you are more likely to miss loan repayments which will affect your credit score. If you find yourself trapped in multiple debts, you need to approach legal money lenders for a debt consolidation loan.
A debt consolidation loan is a good financial tool to prevent your multiple loans from turning into bad debts. The big amount that you get through the debt consolidation loan can be used to repay multiple loans and then you need to only plan for faster repayment of the debt consolidation loan. Debt consolidation loans have lower interest rates and money lender would be happy to reduce the interest rate further if you offer some collateral against the loan.
Pay your credit card debt at the earliest
Credit card debt has one of the highest interest rates and you should focus on getting it cleared at the earliest. Many people fall into the trap of paying “minimum amount due” every month and the result is the credit card debt increases significantly. The truth behind “minimum amount due” is that the credit card company does not levy any late payment fee in that case. The credit card company still charges interest on the unpaid amount.
If it is difficult for you to pay credit card debt, consider taking a loan from a licensed money lender to get rid of credit card debt. The loan offered by money lenders have may lower interest rates than the interest rate charged by the credit card company.
Prevention is better than collection
You need to take a look at your monthly earnings and spending closely. Make a list of essential expenditures and non-essential spending. If you have accrued debt, you need to reduce non-essential spending and focus on allocating more funds every month to clear debt.