Top 4 Bad Credit Habits

Buying items you can’t afford

This is a no-brainer. People usually use credit to buy things because they don’t have cash on the spot. Not a problem if you can pay it off completely. However, it becomes a bad credit habit if they buy something that they can’t afford and are forced to finance the purchase (a 65 inch 4K TV), this can become a bad habit as they start thinking they have the option to pay off their expenses little by little. The next thing you know, their next purchase is a $1,500 couch and they do this the same way. If they can’t pay-off their debts immediately, compounded interest will start owning them. Therefore, buy items you know you can pay off immediately, that means never going above what you have in your bank.  How about for buying a car?

Making Minimum Credit Payment

Using up most of your available credit line and making the minimum monthly payment is another bad credit habit. As said above, you should be able to pay off the full amount (every month.) If not, compounded interests will be owning you. So if you don’t have cash to pay back later, NEVER borrow. Period.

Buying on Impulse

Sellers love people who buy on impulse. It’s a psychological phenomenon that while ignoring the consequences, people buy something (an unnecessary item) even when they can’t afford it. Buying on Impulse happens to everyone every now and then and again, there’s no problem if we can afford it. However when it becomes a habit, it can be a big problem as the multiple expenses add up and this is why I list it as a bad credit habit.

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The key to destroying this bad credit habit is discipline. Some people purposefully delay themselves from buying what they want by always first comparing prices with other store or online shops with their phones. By doing this, they add time between the product and them from buying which in effect drives down your impulses. I think its a good mind trick that can save you from buying unnecessary things. (Have a shopping addiction?)

Not following your Budget

If you don’t know how much you are spending, you risk the chance of going over your credit limit or your available cash on hand. This will make you unable to pay your credit debts in full. This is an unhealthy credit habit and can be dangerous. If you do borrow more than you can pay, try to pay back as much as you can every month. Again, prevention is key so do not borrow if you can’t pay it off. Know your finances! Know how much available cash you have then buy what you can afford. Period. (Read for more on Following Budget)

Some Advice

Remember that it’s okay to be in debt. Just make sure you can manage paying off the debt. Furthermore, I would recommend having an emergency fund. Try to put as much money as you can. I cannot give an exact number of how much you need because people are different. You never know when those unexpected expenses can come up. Medical emergencies, natural disasters, and even taking your pet to the vet for an emergency can cause you to rack up on debt. “Life is full of surprises… You never know what you’re gonna get.” ~Forrest Gump

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