Your credit score is one of the most important numbers in your life. It determines whether or not you can get a loan and what interest rate you will pay on that loan. You will get the best possible loan deal if you have a high credit score, as this indicates that you are a low risk borrower. You could end up paying a lot more for a loan or being denied one if you have bad credit.
This is why maintaining a fair credit score is so important. But you can find pitfalls on the way to improving your score. Here are a few:
Not checking your credit report
While your credit score shows how creditworthy you are as a consumer, your credit report tells your lender why this is so. Your credit report shows a detailed history of how your credit has been since it started. Usually it starts with your very first credit card. For others, it may be a loan, most often a car loan.
Usually, you can get your credit reports from three major credit bureaus like Equifax, CallCredit or Experian. However, even though these are the top three bureaus, that does not mean that they are not making any mistakes. You should always request your credit reports and check them regularly.
Any discrepancies or errors, such as spelling mistakes, can hurt your credit score and, in the worst case scenario, you could be the victim of an identity theft scam. So if you don’t check your credit report regularly, try to make it a habit.
Keep your credit usage high
The meaning of using credit card is the percentage of credit you use on your overall balance. That said, you will become a liability to your lenders if you still reach your credit limit. Experts recommend not using 30% of your total balance on all credit cards. This is to keep your credit usage low.
Keeping your credit utilization low will increase your credit score. It represents a huge percentage of your credit score when calculated. Plus, reducing the balance on all your credit cards will help you better manage your monthly payments.
This is a common problem among people who have bad credit scores. Paying your monthly bills late can generate more fees and affect your credit score. This is a surefire way to go bankrupt shortly, so you need to be careful. Plus, we’re not just talking about your credit card or loan payments, but also your rent if you’re a tenant. But what is the connection between rent and your credit score?
If you don’t know yet, your landlord can tell you about late rent payments to credit reporting agencies. Not just your rent, because even your library fines can hurt your credit score. That said, never get into the habit of paying your fees late. If you’re doing everything you can to improve your credit score, but nothing is working, your late payments could be the culprit.
Submitting too many credit applications
If you slowly but steadily improve your credit score over the months, you may be tempted to apply for another loan to increase your financing. While that’s fine, if a lender turns you down the first time, you should stop there. Why? Going for numerous credit applications can seriously damage the credit score you’ve been working on so far.
Each credit application puts another serious investigation into your credit report. Not only will this damage your credit score, but it will also reduce your chances of getting new credit. Your reasoning is that lenders would ask about these difficult demandswhich may or may not give you a chance to get new credit.
Add more to your debt
And if you get new credit, you might want to settle for that. While it doesn’t in itself hurt your credit score if you get new credit, it also means you’ll have another monthly payment to pay. In short, it adds to your debt. Also, if you use most of your new credit balance, your credit usage will increase, further damaging your credit score.
If you plan to pay off your debts, you may want to start with the interest bearing ones. This is because these debts can earn more interest, which means it will take you a long time to pay them off the longer they exist.
While there are many ways to improve your credit score, there are also many things that can damage it further. The points above are some of the most common pitfalls you can fall into, so you need to be careful of them. Remember that it is not easy to improve your credit score, but it is more difficult to have a bad one.