Top 5 Things that are Damaging Your Credit Score

Your credit score is possibly one of your most important financial assets that is incredibly under-rated by many individuals. So many people go about their day to day lives, spending and piling up debt with very little consideration for the future. Even those who are wealthy with enormous salaries can fall victim to bad credit scores, this is not an issue isolated solely to impoverished working class citizens. This is one of the many myths surrounding credit scores.

I thought you were safe from bad credit if you were rich, how does that happen?

There are a number of different ways you can fall victim to a bad credit score and being rich doesn’t automatically mean that you’re immune.

Skilled professionals, doctors, dentists, lawyers, investment bankers, accountants, it doesn’t matter what your occupation is if it pays well you can easily fall into the trap of bad credit.

And the worst part of it is, many of them remain blissfully unaware of their dramatically dire situation that is ever spiralling further and further out of control.

Why is your credit score so important?

Your credit score is important on the surface because it is what is used by money lending operations and banks use to decide if you are a safe bet to lend money or give a credit card to. However, a credit score and your financial history are much more important than that.

A credit score can directly impact the rates to which you have to repay loans, insurance rates if you can take out phone contracts and in some cases even your employment opportunities. Your credit score can even stretch to effect where you can live, quite controversially landlords sometimes tap in to credit scores to help them decide if they should let you rent out their property.

What can be Impacting Your Credit Score

If you are doing any of the following you need to change your spending habits immediately and start investing more time in taking care of your finances.

If you’ve been negatively impacting your credit score then you are going to want to start repairing your credit score as soon as possible.

Missing or Making Late Payments

Approximately one-third of your credit score is made up of your payment history. If you are continually late or behind on payments, then your credit score could be taking hits. This is especially true if it is referring to payments on a credit card, set up a standing order if you have to, just make sure you are making payments that cover your debt regularly.

But, it’s one of those times when ‘better than late than never’ really rings true. Missing payments is one of the worst things you can do. If you find yourself regularly skipping payments or making them late, you need to refocus your priorities as much as you can to make these repayments regularly. At the very least try and speak to your lender about maybe spreading the loan over a longer period and making the payments smaller.

Too Many Credit Cards

Applying for too many credit cards within a short period can damage your credit score. If you complete multiple applications for credit cards in just a few months then this can give lenders the impression that you’re desperately in need of credit, a warning sign against giving you any form of a loan.

Even if you are desperate, you will heighten your chances of success if you try to keep the number of applications you fill out to a minimum.

This also goes for if you only have one type of credit card. Unusually this can be a factor but typically only comes into play if your credit history is lacking in information.

Refinancing your loans

This will only give your credit score a small hit however, you should be aware that it might tank your credit score enough to effect it in the short term. This is definitely something you should avoid if you are planning on applying for a big loan in the upcoming months.

Not Letting Creditors Know You’ve Moved

Many credit agencies will use your address to help make sure that all of the information in your credit report is up to date. In addition to your address, your name and date of birth are also used.

If you change any of the above information this can lead to inconsistencies and as a result damage your credit score if a credit reference cannot confirm your identity or match the relevant credit information to you. Make sure that you inform your banks that you have moved, you can normally do this in the branch or online.

If you are regularly moving this can also impact your score as it can be a red flag to investors that you’re in financial disarray and so they’ll be less likely to give you credit.

The Amount of Credit That You’re Using

If you use too much of your available credit, or even not enough, it could damage your score. Unfortunately, with things such as credit cards and loans, you have to get a perfect balance.

You want to Ideally aim for a figure somewhere between 10%-30% of your total credit limit. This is so that you can show that you are utilising the credit at your disposal but are at the same time, acting responsibility.

If you hit the 50% mark, that’s is too high, and you are likely to receive an amber warning flag up on your credit report. Anything higher than 75% will seriously hurt your credit score and result in you getting a red mark on your credit report.

If you have more than one card, it is a good strategy to spread the cost between two or three different accounts rather than putting the entire cost on a singular card.

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