4 ways to prevent bad credit

If you're preparing to apply for a home, auto or student loan, you'll want to be sure your credit report is pristine and your debt is manageable. Follow these four tips to avoid bad credit and maintain a flawless credit score.

• Pay your bills on time. "If there were 10 credit commandments, this would be the first one," says Stacy Francis, president of Francis Financial in New York. "It's the most important and simplest thing for you to do to prevent bad credit."
• Don't get too close to your credit card limits. "If you have a credit card that has a $5,000 limit, don't get up to $4,999," says Francis. That can send your score down -- even if you pay off your bills each month. It's best to use 30 percent or less of your available credit.
• Pay bills in full. Minimum payments can trap you into a cycle of increasing debt that can lead to bad credit. Use your credit wisely and be sure not to buy anything that you can't pay for at the end of the month.
• Don't apply for too much credit too quickly. Having credit is great, but getting it is tricky. If you apply for a couple of credit cards, a home equity line of credit and a personal loan in quick succession, lenders will start to wonder if you're digging yourself too deeply into debt. Space out your requests for credit by six months or even a year to pacify lenders and keep your credit score high, Francis says.

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