How often have you had the difficulty of paying your debt, or managing your credit card bills? If your answer is,very often, you could end up paying much higher costs than what you owe to the financial institution. Mismanagement of funds could lead to a higher rate of interest and also leave you with a weak credit score. This will make your future loans expensive and difficult to approve.
A credit score is a very important number in the financial market. It is a unique three digit number that ranges between 300-900 and is based on the credit worthiness of an individual. The information about the credit information is generated by licensed companies that collect information from the lender and provide you with a credit score based on the same.
Here are some ways you can keep the debt costs down in the future:
- Avoid default: A default in loan not only increases the rate of interest on your credit card, but also leads to late fees and penalties. Further, any default will have an immediate impact on your credit card score and the new lenders will view it as a negative behavior on your loan application.
- Close the unused credit cards: If you gave in to the temptation of signing up for credit cards in order to gain an additional discount, this decision will cost you in the long run. Apart from the hidden fees, the credit cards are viewed as existing debts that can lower your credit score in the future. Hence, it is advisable to keep only those cards which you use regularly and manage the payments on the same.
- Maintain a good credit: Keep in mind what you can afford and what you cannot. Do not use all the monthly limit on your credit card expenses. Higher credit utilization will impact your credit score. Hence, reduce the EMIs and begin with savings. This will eventually inculcate the habit of savings in your life.
- Make timely payments: With timely payments of the debt, you can keep the credit costs at a minimum. Be it EMIs, credit card bills or any other form of credit, the timely payment will save on any additional interest, penalty or late payment fees.
- Draw a limit on your inquiries: Constantly looking for new loans and credit cards will increase your debt burden and have a negative impact on the credit score. Instead, look for different ways to consolidate the debt for a lower rate of interest. Debt consolidation is a process which combines several unsecured loans into one loan. This will help you manage your debt as well as improve the credit score.
- Check your information from time to time: Ensure that all your bills are addressed to your current address and that you are getting timely information about the payments. Avoid any chances of missing any payments and submit the latest details to the financial institutions.
With a few simple steps and tricks, you can ensure that your long term cost of financing reduces and is maintained at a minimum.