A credit score is necessary for your general financial health. Lenders and creditors rely on it when deciding to work with you and the costs involved in the process. Getting a credit score above 800 is an uphill task since it takes dedication and hard work. Unfortunately, many people unknowingly make errors that have an impact on their rating. Such mistakes do not only affect your score but also affect the interest rates in the long run.
Here are some mistakes that can lower your credit score:
Avoiding All Types of Credit
You could find yourself in problems due to credit, but you need not avoid all kinds of credit. Instead, choose good credit and steer clear of the bad ones. It is only through good credit that you build your credit score and avoid falling into the debt trap.
In some cases, renting an apartment can be a problem if you lack a credit record. It is because most landlords require a copy of the credit report. Provided the payments are on time and the credit card balance paid off in full, you will be fine.
Making a Late Payment
When you forget to settle payment for your loans or bills or do it late, it will not be healthy for your score. It is advisable to ensure you make the minimum payment each month on the date shown on the credit card statement. Payment is the most important factor when formulating a credit rating which accounts for nearly 35 percent of the score.
When you miss one payment, it can have serious consequences. In case you miss a payment, take appropriate action at the earliest time possible.
Hitting the Credit Card Limit
Although the credit card gives you the maximum amount you can spend, it is not advisable to hit the limit. The credit utilization ratio contributes to a third of the total score. It is determined by the amount of credit available in the accounts.
When you get closer to the limit on the accounts, the credit utilization goes up, which impacts negatively on your score. On the other hand, when you keep the rate low, the credit score is increased.
Closing an Old Credit Card Account
Another part of the score, about 15 percent, is determined by how long you hold your credit card accounts. The longer the period you maintain an account, the more it is likely to benefit you. Many people make the mistake of deciding overnight to close an account. However, this mist not help when you need to raise the credit score, especially if the account has been in existence for many years.