We all know that our credit score is very important when it comes to our financial health. Especially if you’re applying for a loan, your credit score can be the deciding factor in not just getting the funding or not, but also how much interests you ultimately have to pay. Yet, many people don’t have a clue how their credit score is affected. Do you?
There are many factors that go into your credit score, including payment history and credit-to-debt ratio. And you might not even realize it but many things you do everyday affect these factors. Sometimes, we hurt our credit scores without even knowing it. Here are 5 things you might be doing that’s ruining your credit score:
One of the most important (if not the most important) factor to determining your credit score is your payment history. There are many components of your payment history, including types of accounts, time left unpaid, and amount overdue. It is a complex calculation but at the end of the day, just remember this: pay your bills on time. Never let a bill be overdue and your credit score won’t be adversely affected.
Closing Old Credit Cards
A key component to your credit score is your credit history. If you have a long history of good credit, your credit score will reflect positively. However, this credit history can be damaged if you suddenly close your old credit cards. Even though these cards may have been in good standing, your credit history will seem shorter. Be careful when closing credit cards, especially older ones.
High Credit Utilization
Be mindful of how much credit you are actually using at any given point in time, as your credit score takes into account your debt-to-credit ratio. For instance, if you have considerably more debt compared to available credit, this may be a poor indication of your future performance, which will in turn lower your credit score.
Applying for Too Many Cards
Have you ever been persuaded to open a store credit card because of a promotion or deal? Maybe it’s these 0% balance transfer deals and you want to get in on the action. Many have, but you should think twice next time. Whenever you open a new credit card, they check your credit report. Many requests for your credit in quick succession can lower the score altogether.
Letting Accounts Go to Collections
In some instances, you forget to pay bills not because you don’t have the funds but simply because you forget. Don’t let this happen. If you let an account go to a collection agency, this will adversely affect your credit score. Something as simple as an overdue library fee can knock points off your score. Be organized and stay on top of your due dates for your bills.
Your credit score is a tricky number that can be affected by many things. You have control over all of it, though. Don’t let little issues turn into bigger ones down the road. Keeping a high credit score is easier than rebuilding a low one, so stay alert and enjoy low interest rates when you need access to credit.
What are some things you have accidentally done that had a negative effect on your credit score?