Credit score is an important indicator of our credit history and is of great importance for our financial life. It affects our ability to get credit, mortgages, credit cards, and even our insurance premiums. However, many people do not realize that their actions can negatively affect their credit score. In this article, we’ll take a look at the most common mistakes that can hurt your credit score.
One of the main factors affecting the credit rating is the timeliness of payments. If you miss payments, it can significantly hurt your credit score. What’s more, missing payments can lead to additional payments, such as interest and penalties, which will only make your financial situation worse. Therefore, if you are having financial difficulties, it is best to contact the lender and ask for an installment plan or rescheduling to avoid missing payments.
Using credit cards to the maximum
Another common mistake that can hurt your credit score is using your credit cards to the max. This means that you spend all available funds on your credit card. This can negatively impact your credit score, as your credit score is calculated based on the use of available credit. If you use all available means, then this signals that you are in financial difficulty. Therefore, it is better to use credit cards only when necessary and not to spend more than 30% of the available limit.
Requests for new loans or credit cards
When you apply for a new loan or credit card, lenders will make a credit inquiry that may affect your credit score. While a small number of inquiries may not have a major impact on your credit score, frequent inquiries may indicate that you are not managing your finances well. This can lower your credit score and worsen your chances of getting a loan in the future.
Non-payments on bills
If you miss payments on bills like credit cards, auto loans, or mortgages, it can seriously hurt your credit score. Credit reports will show missed payments, and the longer you go unpaid, the greater the negative impact on your rating. If you are having difficulty paying off your debt, contact your creditor and try to negotiate payments or debt restructuring.
High level of debt
If you have a high level of debt on credit cards, loans and other bills, this can negatively affect your credit score. Credit institutions consider that you are a risky borrower if you have a large amount of debt on several accounts. Try to reduce your debt by paying more than the minimum payment on each bill.
Closing old accounts
If you close old credit accounts, your credit score may be affected. Even if you don’t have debt on these accounts, they can be good for your credit score because they show you have a long-term credit history. If you still decide to close the old account, then try not to close several accounts at once.
In conclusion, your credit score is an important indicator of your credit score.