Each of us starts off in business with a clean slate. No if(s), and(s) or but(s). Yet, something as simple as a library fine can hurt our credit card score. This means your business won’t look too interesting to investors. All it takes to avoid bad credit for your business is to make some right financial choices, which aren’t difficult to follow. Let’s take a look at several ways to make sure your business credit card stays healthy.
1. Pay Your Bills
To avoid bad credit: pay your bills on time. Simple logic, isn’t it? Yet, time revealed that the average American in 2016 had $4,000+ of credit card debt. Surprisingly, a year later the average American had $15,654 of credit card debt. One guess as to why are people not paying their bills on time each month. It takes only one late payment to drop credit scores and lose points. Therefore, it is wise to pay on time if you have already received a good amount of credit card rewards for your travel bookings, bill payments, etc. rather than losing it all for one late payment.
2. Pay All
It might make more sense for you (short-term) to make minimum credit card payments but it will take more time to clear off your debts. However, making minimum payments is a no-no on some cards, and can actually increase your debt. Minimum payment calculators are handy for this reason. However, you’ll be paying more interest later on down the road. (Unless you use a 0% APR card.)
3. Miss Bill Payments
It’s inevitable: sometimes, there are going to be some months you’re tapped for cash. It happens to the best of us. This, unfortunately, means missing payments on certain bills. (Those should under no circumstances ever be avoided.) This means credit cards, loans, mortgages etc. It is not wise to leave unpaid bills alone for long (obviously), as those eventually do a number on your credit. When choosing which bills to skip, to avoid bad credit have a plan in place for catching up when you have the funds available.
4. Don’t Touch Credit Limits
Surprisingly, one bad move that sends your credit score plummeting is spending close to your limit. This will happen whether or not you pay off your bills in full each month. Believe it or not, you start losing points once you use 70% or more of your available credit. This is because your credit utilization ratio ends up looking bad – the more credit you need, the less you’ll be able to pay off. (Or so it appears to card issuers. This is the kind of risk they would like to avoid, as this route would keep them from making money off you as a valued customer.)
5. Evaluate New Expense Risks
Thinking of upgrading your phone service? Buying a new car? Shopping online? Renewing your Netflix subscription? What about purchasing a pair of plane tickets across the country? Each and every expense you charge to your card determines how you can make ends meet. Not being able to, obviously, leads to credit cards’ bad rap: high-interest charges. One of the main reasons people wind up in debt and have bad credit… is… making purchases with money they don’t have. (Shocker.)
Bad Credit – Conclusion
My grandfather lived to be 82 – and he went his whole life without buying a credit card. He always used cash. Why? “I never buy what I can’t afford,” he told me. (And he wasn’t even a business-person like you and I.) This came from a wise man who loved to enjoy the finer things in life, too. Five-star restaurants; taking the whole family out for dinner. (Even grandchildren he didn’t see a lot.) He paid for his luxuries using cash he saved up over his lifetime. Consider how putting expenses on your card will affect your monthly credit budget.
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