How to Avoid Falling into Subprime Status

Subprime status credit is too low to qualify for a traditional loan option. When you can only qualify to work with subprime lenders, you are denying yourself the potential of securing a loan that works in your favor. Subprime loans are extremely costly and risky. Subprime lenders also tend to be risky, and many of them have predatory lending practices. Avoid this option by managing your credit and only applying for loans you can afford.

Manage Debt Options

Having a good credit score means starting early. As soon as you are 18 years old, you will begin receiving a number of offers for credit. It is actually better to establish a credit history earlier than this, though. You should begin slowly, taking only small credit lines and loans. Even once your income is high enough to support larger loans, managing how much debt you have is the key to staying out of debt trouble. Keep debt at 10-30% of your total income early in life. Keep the balance on any of your loans lower than 10%. Using credit is important, but using too much is dangers and can be detrimental.

Use Automatic Payment Options

Once you start flexing your credit, it is essential to continue to manage your monthly debt obligations. Missing even one payment on a credit card or loan can set your credit back years. Today, automatic payment options from most lenders make it much easier to keep your debt in line. Set up automatic payments. Then, make sure you elect overdraft protection on your checking account. This will keep you from paying large fees if a debt payment is deducted when your account is low.

Monitor Your Credit

You need to know what your credit score is in order to continue to build it. Monitoring your credit is especially important when you are young. At this point, your credit history is short enough even one mishap can throw your score totally off course. Sign up for a credit monitoring service. The moment you receive an alert or notice a problem with your credit score, be sure to contact the creditor that the report was generated from. You can file a dispute if the report was incorrect. If you actually did miss a payment or other problem, resolving the issue immediately is the key to preventing a further drop in credit.

Watch Utility and Medical Bills

Even though you do not get a credit boost for paying your bills, you will find your score drops by a huge amount if you fail to pay your bills because your creditors will file collections. A number of people suffer huge losses to their credit for items that are not debts. Utility companies and physicians can report you to a credit collections company if you do not pay a bill. Your credit report does not reflect where the initial problem arose unless reviewed very closely. This means your future lenders see the issue simply as a missed payment on a debt. When you move, make sure to close all accounts with your utilities providers and pay remaining balances. The same goes for closing a cell phone or cable plan.


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