A credit score is more than just a number because it’s something that can affect your overall financial health. Whether you’re getting a loan, paying your bills each month, or starting a new investment, having good credit is essential. In the same way that you keep your resume updated even if you have a job, you need to manage your credit to become more creditworthy by the time you want to obtain new credit. Read on as we’ll discuss the six most common mistakes that might damage your credit score.
- You don’t pay your credit or loan payments on time.
Not paying your credit or loan payments on time is one of the common credit score mistakes you need to watch out for. If you obtain new credit, the credit agency will look at your past payment history to get to know your credit score. While one or two instances don’t significantly affect your credit score, the problem arises when this mistake continuously adds up to your credit score history. If you don’t want to find yourself in this situation, make sure to pay your credit or loan payments on time and look for other ways to improve bad credit.
- You ignore or miss errors on your credit report.
You should find time to check your credit report once in a while to know if there are any errors. For instance, payments involving medical transactions usually end up with glitches since it has to go through a lengthy process before the bill is finalized. That’s why the moment you discover inaccuracies on your report, it’s important to call the credit bureaus to start the process of amending them. Try to be more cautious with any errors you notice on the report to avoid the possibility of getting your credit score damaged in the long run.
- You don’t use your credit card on a regular basis.
It’s another credit score mistake that you should be wary of. After all, building your credit history is a vital aspect of utilizing credit. You have to purchase and pay them off on time to show credit agencies that you can manage your credit properly. However, if you don’t use your credit card often, then you might not have any credit history to speak of. As a result, the credit issuers might deny your loan application.
If you’re looking to build and strengthen your credit history, use your credit cards to make purchases and get them paid in full each month. Also, if you think of investing in the Forex market, ask a specialist in Forex trading like Learn To Trade if you can use your credit for that purpose.
- You close your credit card accounts.
You’re making a huge mistake when you decide to close your old credit card accounts. Even if you pay off all the accounts and you don’t need it anymore, you should bear in mind that closing your credit card accounts can lower your credit score. It can impact your credit utilization ratio and alter the length of your credit history. If you have an increased credit utilization ratio, it can be presumed that you’re utilizing a higher percentage of your credit which makes you a riskier consumer. If you need to close some accounts, do it on your newer accounts since the older ones are important in determining how long you’ve been using your credit.
- You ask for an increase in your credit limit.
You have to keep your credit utilization ratio low to maintain a good credit score. However, if you ask for an increase in your credit limit, the credit issuer will re-evaluate your financial circumstances and determine whether to grant or deny one. Remember, your request to increase your credit utilization is usually the same with your new credit application. For that reason, they’ll end up pulling your credit reports by imposing you with higher interest rates on loans. Thus, it’s best to talk to a representative first before making an application to increase your credit limit. That way, you’ll learn more about their policies and figure out whether an increase is a right thing to do for your credit.
- You incur a credit card debt above 50% of your limit.
The amount of credit you’re using is one of the factors that affect the calculation of your credit score. That said, if you have a credit card debt which is more than 50% of your available credit limit, your credit score will probably become damaged. Hence, it’s a good idea to stick with 10% to 30% of your credit to manage it properly.
Building up your credit score isn’t easy. You need to work hard to get the trust and confidence of your creditors. You should also learn how to make the right decisions about using your credit options so you can keep your credit history in perfect shape. By keeping these common mistakes in mind, you’ll be able to prevent any errors or inaccuracies that can taint your credit score.