We all begin our credit journey with a blank slate – zero credit score.

It’s up to us whether we will grow a healthy or poor credit record from here on out; based on the types of financial decisions that we make.

How is a credit score defined & why is it so important to us?

A credit score is a value measuring the creditworthiness of an individual by assessing their financial history and other information. Credit score values begin at 300 (poor) and extend to 850 (excellent).

The higher the value, the more financially reliable the individual appears to be. Currently, as of a study conducted in October 2019, the average credit score in the UK stands at 380 which is described as being fair.

Credit score can be simply defined as a report of an individual’s financial history and spending habits and is one of the few indicators to creditors, landlords, bankers, and an array of other individuals, that you can be trusted to meet your repayments.

A good credit score will not only get you lower loan rates but also lower insurance premiums for your vehicle and home. Overall, having a good credit score will be to your benefit and open a variety of financial doors.

If you are looking to build your credit score or maintain a current good record, then here are five ways to avoid bad credit in the UK.

#1) Do not allow those bills to stack up

The fastest way to turn your credit rating sour is to leave bills unpaid. Accounts such as loan repayments, insurance premiums, vehicle payments, and store accounts are only a few of the common culprits.

The first thing a prospective lender or creditor is going to look at before granting you credit is your ability to meet your payment obligations on time. If you are an individual who makes constant late payments, they will not be keen to lend to you. Making a single late repayment will result in several points been shaved off your current score and successive late payments can result in worse events such as repossession.

However, it is good to find out which bills are reported to the credit bureau every month. Missing a payment on these bills is certain to result in a drop in credit score. But cellphone and utility bills are not reported to the bureau monthly. This means that if you forget to make a payment or run into a tough month, you will have some room to breathe. This does not mean that you should make a habit of paying these bills late though.

It’s best to keep track of the payments that you need to make each month and how much needs to be paid. Unfortunately, forgetfulness is not a valid excuse. However, we are all human, so if you are worried about missing payments you can always set up a debit order at the bank to prevent any potential mishaps.

#2) The importance of good budgeting

Budgeting is a skill that is often overlooked until it is too late. Your salary might be enough to cover all your expenses at a glimpse, but you need to ensure that your lifestyle does not hinder your ability to meet all your financial obligations.

It is best to pull out the good old pen and paper and sit down and make a list of your current income and expenses. You do not need to be a financial guru, but this rough guideline will help prevent you from overspending.

However, if you are concerned, you can always seek financial advice from a financial advisor. These individuals are specifically trained to assess your current income and expenses and provide financial guidance to form the information they collect. They will even give you a few tips to ensure that you can better manage your money in the future.

#3) Do not bite off more than you can chew

When you have a good credit score, credit companies and lenders are eager to make your acquaintance. As explained before, a good credit score is an indicator to creditors that you can be trusted, which is why they approach you with all kinds of attractive deals.

Before you know it you have an additional cellphone contract, expensive internet, a gym subscription, and all kinds of other new monthly financial obligations to meet and not enough disposable income to pay for all of them.

This is where good budgeting comes into play again: there is nothing wrong with taking on new expenses; as long as you can afford them. Review your budget and see if you have the means before you sign any new contracts.

#4) Too much debt is detrimental

While this may seem like an obvious point, it is one that many people often overlook. When you have a good credit record, your credit card company is likely to keep offering you a higher credit limit. The more money you spend on your credit card, the more interest the creditor will earn from your repayments which is why they want to give you a larger credit limit.

However, an individual’s credit score does not only measure the amount of debt they have but also the balance of that debt when compared to the amount owed. This event is applicable to both credit cards and loan repayments.

Keeping your credit card balance low and making regular loan repayments will greatly diminish the amount of debt you have. Too much debt can eventually lead to problems with meeting repayments – particularly if the interest gets out of hand.

#5) Savings can be your saving grace

While living off of credit might be tempting, particularly for its immediacy benefits, it is not necessarily the ideal way to live. However, with the current economic climate, it is difficult to remain credit-free.

Nevertheless, one of the best and easiest ways to avoid bad credit is to make a savings account. Saving money for a rainy day can truly save you from a large number of financial headaches.

The world is filled with surprises, of which most are unpleasant. Anything unexpected can happen; a medical emergency, sudden unemployment, or even the loss of a loved one. In situations such as these, the last thing anyone wants to worry about is money. But these events can quickly cause your credit score to spiral.

But, if you have a nest egg saved up, you can cover all of these expenses without hindering your ability to meet all your general expenses. Once you are back on your feet again, you can always start to replenish your savings once more.

Why you need to maintain a healthy credit score

Unfortunately, a credit score is a necessary factor in our lives, and we cannot live without it. This is why you should do all that is in your power to ensure that you maintain a good credit score.

If you are simply looking for a guide to find your way, then these five ways to avoid bad credit in the UK are ideal. However, if you are already facing bad credit threat then you should seek assistance from a professional.

Making your way to a better and brighter financial future is not as difficult as it once appeared before; all it takes is some good money management.