Best Borrower Tips to Avoid Bad Credit
We live in the modern times where credit plays a big role in the society. In fact, consumers are encouraged to acquire credit in order to build personal credit history. In this article, letâ€™s talk about how credit can be managed more effectively to avoid the risk of bad debt. On Mortgages If you plan to apply for a housing loan any time soon, seriously consider how much you plan to take on. Most banks will offer an amount based upon your monthly earnings which is often 30%-35%of your income. Should you borrow the full amount available to you? Before you decide, keep in mind that your choice today will have a long term effect to your financial situation. Because a mortgage loan involves long term repayment, you will be subjected to a monthly payment for up to ten to 15 years. Itâ€™s very important to consider whether you will be able to keep up with your obligations consistently. Thus, even if you are qualified for a bigger amount of loan, be realistic. According to financial advisors, a borrower must consider taking on a mortgage loan no more than 20% of his/her income. If you still can afford to pay 10% to 15%higher than your earnings, put in your savings account.
It’s also recommended to get pre-approved first before searching for possible homes. This way, you’ll know exactly how much you’re working with and won’t need to waste time looking at properties that are way out of your budget. On Credit Card Debt What about credit cards? Many consumers today own at least two or more personal credit cards. While having a credit card can bring many advantages or conveniences, there are also risks. It’s important to understand that the best way to manage credit card debt is to pay your monthly balance in full and on time. If you don’t, it is your credit card company that will be making money from the interest rate and finance charges you pay. Many consumers have fallen in the trap of bad debt as a result of poor credit card management or uncontrolled credit card spending. If you own a credit card, you need to be doubly cautious and alert about how and when you use this plastic for payment. Do you own a reward credit card? If so, see to it that you do not chase after rewards without considering your repayment obligations. Before charging any purchase or bill to your reward credit card, think about repayment. Will you be able to pay in full and on time? One smart strategy about using a reward credit card is to use it for paying down your monthly utility bills such as electricity, cable, telephone, etc. Use your cash to pay your credit card charges right away. IF possible, post your payment on the same day you charge your bills to your card. Better yet, you can arrange for automatic payment with your bank to make sure that you will not miss your due date of payment. ReadMore: Best Borrower Tips to Avoid Bad Credit