06 Apr 5 Factors That Can Adversely Impact Your Credit Score
Modern life invariably involves us having to borrow money, whether it is our credit card, an overdraft facility, a car loan, or a mortgage; debt is, for most of us, a fact of life. So much so that debt management is one of the most requested services that financial advisors and financial planning companies get asked for.
Being able to obtain credit is something that many of us take for granted and assume that because we have never gone overdrawn at the bank and have kept up repayments on any credit we have, we will never be refused. While both will help, they are not the only factors determining your credit score.
Several elements are used to calculate your credit score, and it is often only when someone is refused credit that they then, for the first time, make inquiries about their own credit rating. When they do, they are often shocked that their credit score is lower than what it should have been due to actions they have taken that have adversely affected it. Here are some of those actions that you should avoid to protect your own credit score.
Late Repayments
That is probably the most apparent reason, but it still merits being repeated. Most people will occasionally be late with a payment, but you should try to do all you can to remain up to date, especially with payments to loan and credit card companies. These late payments remain on your credit file for 60 days, and overdue accounts can stay there for up to 5 years.
Not Paying Bills, Even If They Are Disputed
You may receive a bill, possibly from a utility company, which you wish to dispute. The problem here is if you refuse to pay the bill until the matter is resolved, that missed payment can appear on your credit file, and damage your credit score. The same applies to credit card bills where you dispute an item that appears on your bill. As much as it might rankle, always pay a disputed bill to protect your credit score, then try to resolve the issue thereafter.
Applying Multiple Times For Credit
This is an issue that lots of people create unwittingly when applying for credit. They apply to a dozen different loan companies, hoping that one of them will provide a cheaper repayment rate than the others. The problem is that multiple applications, all made over a short period of time, are a red flag to credit companies, and as such, your credit score is damaged. The solution is to research loan rates first and apply only to one or two companies offering the lowest ones.
Not Correcting Errors In Your Credit Report
The credit rating system is not infallible, nor are loan and credit companies. This means that errors can appear on your credit report, adversely impacting your credit score. Unless you check their credit score regularly, you will only discover this when you apply for credit and get refused. Checking your credit report for errors is essential, and they can normally be rectified by simply asking the company responsible for the error, to correct it.
Maxing Out Your Credit Cards
If you take your credit balance close to your maximum limit on every credit card account, it can impact your credit score. Where possible pay off some of the balance as the more unused available credit you have, the higher your credit score will be.