What Hurts Your Credit Score
There are various things that can hurt your credit score. Better your credit status is, the lesser the interest rates you will have to pay on credit lines and loans. It is your credit status based on which a lender will determine the interest rates and your credit worthiness. The three major credit monitoring companies that will determine your score include Equifax, Experian and TransUnion. There are plenty of errors that you should avoid so that you can improve your credit score. Some of the major financial missteps that can damage your credit score are-
Late Or Missed Payments
Your credit score comprises of 35% of how consistent and timely you are with your payment history. One single late payment might not ruin your credit completely, but it will have some negligible effect on your score. But if you make a habit of missing payment regularly, your credit is going to suffer significantly. To cover up the cost and risk, lenders will charge late fees and even increase the interest rate. Therefore, every time you miss repayment, you will end up paying for it in two ways- extra fees for missing the payment and increased interest rates. Such extra fee can make your loan very expensive. At time you may end up paying double the amount that you may have actually borrowed.
It is true that employment can hit everyone at some point or the other. It can be tough. But fortunately, there are various unemployment benefits available, that will help you get through such tough phase. Before you apply for such benefits you should understand that they can affect your credit score to some extent. Therefore, whenever you opt for such benefits choose them for as short time period as possible. Credit bureaus may not be aware about your unemployment status. All they will recognize is the reduction in your monthly income. This may also make it difficult for you to repay the borrowed money in a timely manner, which is going to directly affect your credit score.
Multiple Credit Requests In A Short Time Span
Making multiple credit requests in a very short time span is going to affect your credit score. The credit bureau will get the wrong notion that you are desperate for cash. Therefore, avoid applying for number of loans back to back. Making multiple requests for one type of loan may not affect your score as it will be counted as inquiry. No matter what urgency you are facing, be aware of the different type of credit and how they will impact your score. Some may have negative impact while some may not.
Everyone knows that ignoring loans will hurt your credit. But you should know that ignoring bill payments, utility, and medical bills can hurt your credit score as well. Most of these companies will never report when you are making regular payments, but if you miss even a single payment it will get reported. If necessary, set up automated payment to avoid non-payment and negative impact on credit.
Most of the time people think that getting the credit card closed which they are no longer using will be a good decision. But that is not the case actually. If there is a significant balance left on your card, closing the card will take a toll on your score. A portion of your credit score is determined by the overall credit extended to you. Therefore, removing that card from the equation will remove a portion of the credit granted to you and thus damage your score.
Ignoring Potential Inaccuracies
Your credit report may have errors due to various reasons and you may not know about it. Failure to keep a check of such mistakes on your credit report can make it worse with time. Thus, you should be proactive enough to check them and get them corrected. It is free and very simple to check your credit report.