Consumer credit scores play an important part in our financial lives and its necessary that we take steps to do the right things to improve our credit scores and maintain a high score as well. It’s also important that we understand what actions or inactions will harm our credit score.
Some consumers make mistakes (willingly or unwillingly) that result in their credit scores to drop significantly. Even if you think that you won’t need a loan in the coming future, having a good credit score will qualify you to get lower insurance premiums, your chances of renting an apartment, or even getting a decent job in some cases.
A good credit score is very important for most life decisions, which you’ll need to make, even if it doesn’t seem to do at the moment. Don’t wait for the time to improve your credit score, and by the time you do it, it will already be too late.
Below are 7 things you may aren’t doing right that are harming your credit score.
1. Applying For New Credit Frequently
If you open too many new credit accounts in a short period of time, then your credit score may at risk. See every time you apply for new credit, the creditor pulls your credit history to determine your creditworthiness, and your credit score takes a hit. These hard inquiries can cost your credit score up to 5 points from your existing score, and can create a negative impression about how you use credit.
2. Closing Down Old Credit Accounts
While calculating your credit score one of most important factor that is taken into account is how long have you been using credit or to be more specific, the length of your credit history. If you paid off your oldest credit account and decided to close it, then you are shortening the length of your credit history, which will cause your credit score to drop.
3. Maxing Out Your Credit Cards
Maxing out your credit cards will negatively affect your credit utilization ratio. This matters when you are applying for a new loan. This can also affect you when you don’t have enough funds to pay off the balance from your previous purchases.
4. Missing A Credit Payment
Just missing one credit card payment can result in a drop of your credit score. If you happen to miss or delay several credit card payments, then your credit score will go down significantly. You may also have to face a lot of problems with your creditors trying to collect from you.
5. Ignoring To Check Your Credit Report
Every consumer is entitled to receive one free copy of their credit report from all three major credit bureaus every year. You won’t find your credit score in these reports, but should still request them and review all off your listed data. Sometimes there are errors on your credit reports, and if they are left undetected or uncorrected, then they can result in your credit score to be lower than they should be.
6. Ditching Your Creditors
If you have debts that aren’t paid and that have been referred to collections, then you credit score will be harmed more than a constantly ringing telephone. If you have huge outstanding debt, find out a way to pay them off, before they even go to debt collections. If you think that you don’t have any debt, then ensure that you have proof of your claims, and get in touch with your creditor or debt collector to resolve the situation.
7. Co-signing A Loan/Credit Card For Others
If you choose to co-sign a loan or a credit card for others, then you can do serious harm to your credit score. If the person you are vouching for happens to neglect his/her responsibilities, then you will be held responsible for the debts incurred, and your credit score will be seriously damaged from their actions.