Having a solid credit score is essential for day-to-day transactions. It can assist you in obtaining low-interest loans, getting your loans authorised faster, and obtaining better credit terms.
Conversely, a single credit mistake can harm your credit score and potentially result in a loan rejection, whether you’re seeking a Home Loan, Vehicle Loan, Secured Personal Loan, or even a Marriage Loan. You must understand how to eliminate these mistakes to obtain the best deals.
This post will walk you through some of the common reasons for bad credit and what you can do to avoid them!
Not Reviewing Your Credit Reports Annually:
If your credit score was decent when you last sought a loan, that doesn’t mean your credit is still in excellent nick. You may not always be informed of any errors in your credit report.
These errors lower your credit rating and raise your prospective interest rates. As a result, make it a routine to examine your credit report every couple of months and quickly inform the credit bureaus about any inaccuracies.
Not Paying on Time:
Your credit score severely impacts if you are overdue or skip payments for more than a month. As a result, you must adhere to the monthly plan to make prompt payments.
Make paying your instalments a priority in your money management. Set up mortgage and bank card payment alerts or automated transactions.
Paying the Bare Minimum Every Month:
You will pay extra interest if you carry a balance forward. As a result, it’s advisable to pay the entire balance every month.
However, not everyone can pay off their credit card bill every month. If your resources permit it, don’t just pay the least possible amount. Instead, pay off your entire balance or as much as you can each month.
Using Your Credit Card to its Threshold:
A maxed-out card lowers your credit rating by increasing your credit utilisation ratio. If you routinely top out your cards and have trouble paying them off, your income is insufficient to cover your expenses. As a result, you can either raise your income or reduce your expenses.
If, on the other hand, you’re topping out your cards and have no trouble paying them off, call your credit card company and ask for a credit limit raise.
Multiple Credit Card Applications in a Short Period:
A credit card application lowers your credit score by a few notches. If you register for multiple credit cards in a brief span of time, your prospective lenders may become sceptical and dismiss your requests. Thus, make it a habit to apply for new credit cards as required, one by one.
Letting Your Card Become Delinquent:
The consequences of a charge-off are severe. It is one of the most damaging things to put your credit score through.
Your credit card getting charged off signifies that your account has a default. The lender may sell it to a debt collection company to recoup the sum if it has been late for more than half a year. The charge-off will appear on your credit history for 7 years and significantly impact your prospects.
So, in case your account is overdue, get it up to date before it impairs your credit rating.
The credit industry is both complex and quicksilver. While many individuals think about credit just in applying for loans, it’s a lot more than that.
It’s critical to remain on top of your credit and understand the different elements of your credit report, regardless of the type of loan you’re applying for, whether it’s a Property Loan or a Secured Personal Loan.
Credit mistakes are easy to make and can have lasting consequences, so it’s crucial to know how to avoid them. Armed with the tips shared in this post, you can ensure your credit is serving you well.