7 Credit Score Pitfalls
Like it or not, many aspects of your life are ruled by your credit score. If you have a below-average credit score, you’re regarded as a higher risk by lenders, and a mortgage, auto loan or credit card will come with a higher than normal interest rate. Or you might not even get approved for a loan or credit card at all.
If you’re trying to rent an apartment, you should expect the landlord to check your credit – and you may well be turned down if your score isn’t that great. The same applies when you’re looking for a job. Prospective employers often request an applicant’s credit report if they’re thinking of making an offer. In today’s tight job market, you need all the help you can get, so don’t let your credit score lose you the opportunity to get a good job.
Points are added and subtracted to your credit score based on the content of your credit report at any given time. These are some of the most important mistakes to avoid if you don’t want your credit score to take a hit:
Don’t be a late payer: Pay your credit card and utility bills on time if you want to maximize your score. Although the new rules allow you to be late occasionally, making a habit of it will put a note on your credit report and lower your score.
Avoid having your credit card account sent to a collection agency: If you haven’t paid your credit card bill for a few months, the issuer will stop trying to pursue you for the money and hand the job over to a collector. This is also noted on your credit report.
Don’t default on a loan: Likewise, not paying back a loan will severely dent your score.
Stay out of bankruptcy: Going bankrupt deals a big blow to your credit. Try alternatives such as consumer credit counseling instead.
Avoid foreclosure: Even falling behind on your mortgage affects your credit. Having your home foreclosed also makes it harder and more expensive to get a home payday loan in the future.
Don’t max out your credit cards: Lenders want to see that you can manage your credit sensibly, so don’t charge more than two-thirds of your limit. Otherwise, they’ll suspect you’re living beyond your means and that you’re a bad credit risk.
Avoid applying for multiple offers: Each time you open a new account, the average age of your credit history drops, which is bad for your credit score. Also, whenever a prospective lender asks to access your credit record, a so-called hard enquiry is generated, and this too takes a toll on your score. You’re less likely to be approved by a bank, credit card company or other lender if you have several hard enquiries on your record within a short time, as they view people who make several different applications at the same time as poor credit risks.
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