Extremely Harmful Credit Record Disasters to Avoid
One of the golden rules when it comes to acquiring personal loans or other financial obligations is to at least have a credit score of 720 in order to have at least a good chance of secure the desired car loan or personal loan. Likewise, boasting this magic number is always preferred when the time comes to negotiate preferential rates on loans, credit cards and others. In order to keep things flowing smoothly for you financially, it is always advisable to check your credit score at least once every, this allows you to view how it has progressed (o deteriorated) and to take action and correct any errors, mistakes, or omissions that could be affecting it and have it in pristine condition before you applying for a credit or personal loan. Other benefits of sporting a clean credit record is that employers, cell-phone providers, and even landlords tend to offer people with good credit scores favorable terms when negotiating contract terms.
So, in order to keep your credit score in great shape, here are a few disasters that you should avoid at all costs:
Never max out your credit cards:
Sometimes, card owners who have credit cards with low interest tend to become overconfident and to even forget that they are using a credit card to pay for some of their expenses, so they end up maxing out their cards. This is a huge mistake, since a good percentage of a person’s credit score is usually calculated on the person’s available credit. What that means is that carrying a high balance will definitely affect your credit score negatively. Likewise, if you make an effort to keep your available balance low, you credit score will tend to improve.
Missing you payments:
Never miss your payments. This can’t be stressed strongly enough. The reason for this is that even a single missed payment will affect your credit score negatively. Considering this, you should always keep tabs on the due dates of your bills and when possible, even make payments up to one week in advance. Make extensive use of online tools that allow you to program automatic charges to your cards. This allows you to completely forget about some monthly bills and never affect your credit score. Now, if for any reason you have trouble making even the minimum payment on your credit cards or your personal loans, approach your bank or financial institution to negotiate terms and set up new payment plans if necessary. You will be surprised on how willing to work with you most financial institutions will be if you are honest about your finances and show a legitimate willingness to improve your situation.
Applying for new credit or new personal loans:
Applying for additional credit cards or personal loans immediately triggers inquiries on your credit report, which will cause it to drop a few points. Of course, that doesn’t mean that you should never apply for additional credit cards or for personal loans, but you should definitely avoid doing it over a short period of time. The shorter the period that pass between your applications for new credit cards or personal loans, the more red flags that will rise on the eyes of potential lenders.
Not using your available credit:
This one can be easily summed up in a few words. “If you are not going to use your credit, then don’t ask for it”. Some people become really good at their finances, managing themselves with cash-only basis. If you are one of these people, you should definitely ditch your credit cards or never ask for personal loans. The reason for this is that a stale credit card can also harm your credit score. In this respect, the best scenario for you would be to keep your credit utilization ratio by keeping at least a couple of credit cards active by – for example – using it to charge small purchases. This will improve your credit score.
Do not close old accounts:
While it definitely will feel great to be able to pay off all your cards and personal loans, it is never a good idea to close the account once that happens. Instead, simply keep the credit line open and your credit score will improve greatly. Just keeping your credit lines open will increase your overall available balance and help you improve your credit score over time.