When you are going in for a loan, you have to ensure that your Credit score meets all the requirements. But quite often what we do not realise is that we make decisions which spoil our credit report. Here we are going to tell you about those mistakes which ruin your credit score but are easy to avoid.
Be well informed about your credit score and keep it healthy – One reason why people have Bad Credit Scores, is because they don’t update themselves regularly regarding their credit score. They never come to know about their bad credit scores until it is too late. It is easy to get a report of your credit score, hence you should check it as often as you can, especially when you are about to take a loan. If there are errors, you can always correct them and improve your score. In case there is a discrepancy then make sure you notify the anomaly to the bureau and follow it up with them, till they change it.
Do not overuse – Many people think that till the time they cross their credit limit, their score won’t be affected. This is where they are wrong. If you use more than 50% of your credit limit, it gives an impression to the lenders that you are credit hungry and that you might not be able to pay them back on time or in full. These doubts can be used as a ground for rejection.
No delay in payments – Many people are under this misconception that if they delay their one odd payment, then their credit score might not be affected as they can pay it at a later time. What they do not realise is that every late or delayed payment is reported by the bank to the credit bureau. Although, one odd payment might not have an adverse impact on your credit score, but a string of late payments is bad news for your credit score. In order to undo the damage, you can start by making all your repayment on time. You could also give instruction to your bank, which will automatically deduct money from your bank. This way you can avoid late repayment.
Do not close old credit card accounts – When people are stabilizing their credit card debt, they tend to cancel or close their old credit card and continue with their new ones. What should be done is the opposite. One the parameters of calculating your credit score is the age of your credit accounts – the older they are, the better it is. It gives the bureau a chance to go through your long credit history basis on which they will evaluate your repayment record.
Do not apply for multiple loans simultaneously – It might seem to be a good idea, but applying for multiple loans in order to increase your chances of getting a loan is a bad idea. Each time you apply for a loan, it is recorded and calculated in your credit score. And when the lenders see that report with numerous application, they might see you as “credit hungry”, and that again is not a good news. So apply to only those lenders you know/feel will approve your loan application.
