These Mistakes Will Destroy Your Credit
Before you swipe your credit card to make a big purchase or take another loan to offset the previous debt, it would be wise to consider the consequences it will have on your score if you overextend your credit. Many institutions, from banks and insurance companies to phone companies and energy providers, check your credit history before making any financial engagement with their clients.
Believe it when you read that you do not want to need service from these companies when you find yourself with an unfavorable credit score.
How bad credit can affect you
A poor credit score may mean that you will not qualify for many other loans that are available in the market.
Lenders could reject your applications. Even if they approve the applications, the lenders will consider you high risk and charge you higher interest. People with low credit ratings rarely ever get the opportunity to take new loans to finance new projects, fund their businesses, or buy a home.
The problem is that high-risk borrowers do not have success with loans in general. Insurance companies will use your credit score to determine your premiums for personal, property, social, or guarantee insurance. Insurance firms associate people who have poor credit scores with risky lifestyles and an increased number of claims, regardless of how many claims you have made in reality.
Many employers, especially those in the finance industry, use specific criteria to filter out job applicants, too. One aspect is the applicant’s credit score.
If you let your credit score drop below a certain number, you may find it more challenging to land upper management jobs in many companies. Employers also lump applicants who have lower than average credit scores with people who have excessive debt and a history of bankruptcy.
If you still have your credit score intact, do all you can to keep it that way if you dream of starting a business someday. Most startups need financial assistance to break even, but it would prove difficult for owners with bad credit.
Even before the business takes off, the landlord will check to make sure the business owner’s score is above average before approving the use of their premises.
Credit mistakes to avoid
So, what can you do? Here are some simple lifestyle and money tips that you can follow to protect your credit rating.
The most important step is to avoid unnecessary or excessive borrowing. Look at your present situation and future financial goals and think hard before taking another credit. Avoid borrowing if you are not sure whether you’ll pay it back in time.
For most people, the primary cause of poor personal credit scores is borrowing too much on good credit and then failing to meet the financial obligation to the lenders.
You also need to avoid impulse buying and make proper money management a habit to protect your credit score. Financial discipline will not only keep you out of debt but propel you to reach your financial and life goals with less hassle.
Another bad habit you should avoid if you want to protect your good credit score is paying your bills late. Many people fail to realize that perpetual late payments severely impact their credit scores. Phone companies, electric providers, and credit card companies will often tag problematic subscribers, and this information will impact their credit scores.
Protect your score by setting reminders when your bills are due for payments.
Build your credit back with these tips
Once you understand how an individual’s credit score is calculated, you should be able to improve credit score woes more easily.
The first step is to pay off any outstanding debts and keep the balances on credit cards or any revolving credit low. It will help you build credit because when you keep your credit utilization ratio low, it boosts the base credit score.
Secondly, focus on being in the “good graces” of your utility companies. Once you have made it a habit to pay your monthly bills on time, it will have a positive impact on your credit score. Make consistent, timely payment of bills over a year (or more) to bring your credit rating back onto level ground.
If you can avoid it, do not open any new credit accounts until you have improved your credit standing. Close unused lines of credit to focus on improving your score.
You have the power to choose how much effort you are willing to put into recovering your credit rating, and only great sacrifices will yield remarkable results.
If you have problems rebuilding your credit or face a unique situation, consider calling on a professional for credit counseling and advice on what it will take to rebuild your credit score.