4 Things that Can Hurt My Credit Score
Credit scores are extremely important for an individual, especially when he or she applies for a loan or insurance. Maintaining a good credit score is crucial in order to maintain a good financial condition, and so that applications for loans in the future can be processed without much hassle.
Credit scores also come into play when you are in the market for a house to rent, your application would be evaluated based on your credit score as well. Thus it is imperatively important for you to maintain good credit scores, and eliminate some of the threats that may endanger your credit scores.
Let us look at some of the threats and common mistakes that are committed by many out there, which in return damage your credit scores:
1. Missing or Late Payments
It doesn’t take an expert to tell you this, that missing payments or making late payments put dents on your credit scores without a doubt. Credit scores would monitor how you manage your current and past credit obligations and payments, and having a number of missed payments or late payment would definitely look bad on your credit scores.
This would probably give the indication that you may do the same in the future, something that would damage your chances of securing loans from creditors in the future when you apply for one. So remember, never miss payments, and try to avoid late payments as much as possible.
Your credit scores would also be affected if your late payments are frequent, if you show missed payments in recent times as well as how severe are your late payments (weeks or months?).
2. Settling with your Previous Creditors with A Lower Amount
When you settle a former debt with a creditor with a settlement figure less than what you actually owe the creditor, business-wise it is a good deal as you do not have to pay back the full amount that you owe. Nevertheless, the creditor would report the remaining balance that you did not pay to the credit bureau negatively, and this is what they call the deficiency balance.
If possible, work with your former creditors and ensure that whatever credit settlement that is accomplished between both parties stay between the two of you, and is not reported elsewhere. Or you could find your credit rating severely affected by this.
3. Over-utilizing your Credit Card Limits
When you have high balances on your credit cards, your credit scores go down in tandem. This is a classic case of over-utilization of credit cards, when you run your balances close or even more than your credit limits, and subsequently pay the minimum amount every month to avoid more financial problems.
Use your credit cards only when required, and try to settle your balances as soon as possible if you want to have a good credit score. Having too many credit cards and too much outstanding balance are never good points if you are speaking of credit scores.
4. Not Possessing a Credit Score
It’s a threat alright if you do not have a credit score in the first place. Consumers who use and manage credit well are well rewarded in the United States, especially when you require loans. Without a credit history, you would not have a credit score, and this would dampen your chances of obtaining loans or insurance or even a home when the need arises.
Not having a credit score would make it difficult to assess and evaluate your financial situation, thus creditors would find it hard to process your application. Many would pass the opportunity and reject your application rather than manually processing them.
Having taken all the above-mentioned threats to your credit score into account, it is advisable to tread carefully when it comes to credit ratings and scores as it pretty much defines your ability to obtain loans when the need arises.
Always maintain a good credit score, and eliminate all the threats to your score by avoiding them or working on correcting them as soon as possible. All the best!