Today maintaining a good credit score is as important as maintaining a good health. Every second person we meet complain about having a low credit score. Committing minor mistakes can hamper your credit score, which make the consumers worried about it. There are several reasons responsible for having a low credit score, which includes the constant negligence of credit report or simply the unawareness about various elements of the score. People tend to make similar other trivial and major mistakes that end up deteriorating the credit score. Though there are several best credit repair service companies that help you improve your credit score, prevention is better than cure. You can choose to remain well informed and avoid the common mistakes committed by people that hurt the credit score.
Have a look at the 7 Common Mistakes That Hurt Your Credit Score as under:
1). Paying credit/ loan payments late
This is the most common mistakes people commit that ruins their credit score. Almost everyone makes it once or twice in his or her tenure. One of the key elements, which any credit agency uses to define your credit score, is your earlier payment history. In a majority of cases having one or two late payments on your loans, credit cards or any other credit obligations though may not ruin your credit record in a significant way but these trivial mistakes if keep on adding it will go against you. Check more about credit score.
2). Your Expenditure reaching to your credit limit
The debt utilisation is something that governs a large chunk of the calculation of your credit score. The debt utilisation ratio is nothing but the credit amount available for you to use. If you are using a credit card and have crossed the 50 percent of your limit then you start hampering your credit score. It is always better to keep the debt limit between 10 to 30 per cent to play safe for getting a high credit score.
3). Racking up the credit card debt early in your life
A majority of people get their first credit card when they are a college student. Having a good start is important when it comes to the credit history; however, most of these first-time users end up spending beyond their limits and mess up with their credit score. They barely know that their bad credit history is going to count in the future in getting credit card or loans in the future. So, when you apply for a loan to get a home or a car, your past bad credit score will be a big hurdle in getting it. Getting into the debt trap can act against you while you are trying to get a credit in the next phase of your life.
4). Closing Your Credit Card accounts
Once you close your existing credit card, you hamper the credit amount that was available to you. One-third of your debt utilisation ratio has to do with your credit score; hence doing this can hamper your credit score in a big way. However, if you still want to close the credit card accounts, make sure you do the newer ones the first and have the older ones as these have your longer credit histories. We know that 15 % of your credit score is defined by the amount of time you have been using the credit card.
5). Frequently applying for new credit cards
Once you apply for a credit card, your profile is checked thoroughly with an official inquiry. Every time you apply for a new credit card, the same official inquiry, which gets the access to your past debt history and hence having low or bad credit score will ruin the chances of getting the new credit card due to a low score. However, if your track record is clean then applying for a new credit card will help you get a higher credit score. Even the multiple inquiries about different credit cards too can contribute to another mistake that can affect your credit score.
6). Neglecting/Missing Errors over your Credit Report
It is imperative to check your credit report on a regular basis as it helps in fixing the inaccuracies. For instance, the hospital payments that consume lots of time to bill you can rack up issues or add inaccuracies. Checking the AnnualCreditReport.com can help you in checking your credit report. In case if you see errors in your credit report, you can resolve them by contacting the credit bureaus to do the needful. Check more about credit report – https://en.wikipedia.org/wiki/Credit_history
7). The Bouncing checks
Unlike the missing credit card payments that prove your inability to make payments, the bouncing checks are also counted against you that further hamper your credit score. This is among the common mistakes being carried out by the consumers, which is mostly due to carelessness. It is recommended to keep a check of your bank balance before you issue a check for your EMIs.
8). Borrowing money simply to improve your credit score
Though this may sound incredible, there are several credit schemes, which bill themselves like credit score boosters. Newsflash is one such example wherein you do not have your monthly balance over your credit card to justify your creditworthiness. So, any instant credit scheme, which promises anything will hamper you in one way or the other. Make sure you avoid them and keep your debt utilisation ratio below 30 per cent. So make sure you make all your payments on time, and you end up boosting up your credit score.
9). Paying your rent late
There are many landlords and property owners who ask for one month rent in advance and do not ask the same later one. This can lead the landlords to report about your late payments that can hamper your credit score.
10). Not Notifying the creditors if you have changed names
Though this may seem too trivial doing so can hamper your credit score. Your bank accounts, credit card application and all your other documents, which remain part and parcel of your credit history, are seen getting clubbed into your report in several ways.