The concept of how certain sins that you
commit and how it affects your life is present across all cultures. In fact,
sins and redemption have been embedded in our public consciousness that from
classic art works to movies. (remember the movie Se7en?).
Don’t look so grim, we have only extended
this concept to your credit score, along with these ‘sins’ there are also
countermeasures that would help you correct the sins. Read on and may angels
guide you on your lofty quest!
#1. Being
Late
Late payment is one of the most common
mistakes that many make after taking a loan or using a credit card. Your credit
score gets affected significantly when you fail to make payments on-time to the
lenders. Delayed payments get registered in your credit report, making it
difficult to get credit in the future. Hence, avoid defaulting your repayments
in order to keep your credit score intact.
#2.
Incorrectly Closing Your Credit Accounts
Though closing a credit card will not
affect your credit score,
incorrect closure of your credit card accounts will have a negative impact on
your credit score. Clear all the dues on the card and obtain a NOC certificate
from the lender after closing the credit card.
Similarly, if your loan is in a ‘written
off’ or ‘settled’ status, it does not mean you have closed your loan. This
status will reflect in your credit report, ruining your credit score. Clear the
past dues to improve your credit score and subsequently become eligible for
future loans and credit cards.
#3. Exceeding
Your Credit Card Limit
Every credit card issuers set a credit
limit on your credit card based on your eligibility and credit requirement.
When you use more than what is allocated, you may end up hampering your credit
score. it is always recommended to keep your credit utilisation ratio low to
get a good credit score.
#4. Ignoring
the Errors in Your Credit Report
Credit report is updated periodically by
the credit bureaus based on the information provided the lenders. As there is a
human work involved, there are chances for incorrect information to get
updated. Any factual error or incorrect personal details could ruin your credit
score. It is recommended to keep tabs on your credit report regularly.
#5. Applying
for Too Many Credits within a Short Time
You might be in a need for funds to meet
your immediate need. In desperation, you may tend to apply for a too many loans
simultaneously. This is considered bad to your credit health and eventually
hurt your credit score.
When you apply for a loan, the lender makes
a hard enquiry which can affect your credit score. Too many hard enquiries will
result in poor credit score.
#6.
Paying Minimum Balance
Paying minimum balance on your credit card bill may help
you manage immediate financial trouble. But continuous minimum balance payment
could add up your debt and eventually sabotage your credit score.
#7. Becoming
a Co-Signer
Co-signing a loan will have a potential
threat to your credit score. Though there may not be any credit mistakes from
your part, a default in payment by the main applicant can hurt your score as
you are equally responsible for the repayment.
Too err is human and it is never too late
to rectify your credit mistakes. Take action from the day your have identified
your mistake and work on to improve your credit score.
Afterword
Credit score is an important criterion
which the lenders check before processing your loan and credit card
application. Sometimes, it is difficult to figure out why your credit score is
in a bad shape. If you are in such a state, you might have committed some of
the common financial mistakes(or) that would have impacted your credit score
negatively, but always remember there is always recourse.