6 Things That Hurt Your Credit
A credit score is one of those things no one wishes to deal with, especially since it feels like someone is reduced to a number. We have to deal with it because lenders use I when determining whether to approve your loan or not. The good thing is you have control over your credit score. When banks are assessing your finances, they look at the whole picture. If you have been good at your spending and repayment, then you can expect to see this reflected on your score.
There are things that are going to hurt your credit apart from your bill payment history, debts, and defaults. Below are some of the things that hurt your credit and how you can avoid them.
Applying for lots of credit
When you do this in a short time, it is going to negatively affect your credit. When you apply for credit, it is recorded on the credit report. When you do this a lot in a short time, it shows that you are desperate for credit, which could end up negatively affecting your credit score. If you did not have a good credit score before, you can expect to have an even harder time getting approved by a lender.
Before applying for a credit, it is important to compare the different options, and this applies whether you want to get a personal loan or credit. You should be applying for what you are eligible for.
No active lines of credit
This can be a little frustrating for most people. When you have no lines of credit, you will have a blank page on your credit history, and your score will be low. You are not attractive to the eyes of the lender.
This is one of the disadvantages of using debit and cash. They have no impact on your score, which means it cannot be leveraged when it comes to lenders and banks. Banks usually prefer responsible borrowers, which can be hard to show when you don’t use your credit card.
You need to get yourself a credit card, but it is also important to properly manage it. Get a credit card then set up automatic payments.
Maxing out the credit card
The Debt-to-credit ratio is very important because it used when calculating your credit score. This is calculated by finding the percentage of the total credit limit you have used. If you have a credit limit of $10,000 and have used $3,000, then the ratio is 30%. You need to have a small ratio because it lets the lender know you are responsible with your credit card.
Find 30% of your credit card limit and try your best not to go over it. Have a budget so you can manage to better track your spending.
Not correcting errors
Inaccurate information or errors by creditors can affect your credit, which makes it very important to correct them. Regularly check your credit score, especially when you want to apply for a loan. If you notice an error such as bills not listed correctly or a bill that should not be there. When you notice an error, call up the credit provider so they can correct it.
Everyone is entitled to a free credit report every year, which means you should use yours to check it out and see if there are any errors.
Having a partner default
This is or those with mortgage payments or joint funds. Sharing finance means sharing debts. If you and your partner have credit cards and bills in both your names, you need to be careful because defaulting can affect individual credit scores. Never let such things get to such a point because they can strain the relationship.
Choose separate accounts if you think you cannot rely on your partner to make the payments on time.
Closing a credit card that has a great repayment history
If you are thinking of closing a credit card because you don’t use it anymore, don’t do it yet. If you have been responsibly using it, then it can still help with your credit, whether you are using it or not.
You should not close a credit card account with excellent history because it is like benching a star player. A high credit limit or multiple sources of credit can be a red flag because it will increase your capacity for debt. There are times when having an inactive credit card makes it harder to get a new credit card or loan.
If you are not paying fees on the card, then you can leave it open. If you want to apply for a loan or a new card, then consider closing the account.
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