We have touched in a previous article the subject of the credit score: what it is, its importance and the factors that are used to calculate it.
In order to have a good reputation with financial institutions, we must avoid behaviors that can negatively affect this score. This will allow you to increase your reliability when applying for loans, in addition to being able to negotiate lower interest rates.
Let’s look at five behaviors that are toxic to your credit rating and that should be avoided at all costs.
Late payments hurt your credit rating
It goes without saying that making payments on your credit card late or not paying your debts penalizes you.
Paying only the minimum due on your credit cards, going bankrupt in the last seven years, having trouble with collection agencies and bad checks are all factors that will affect your credit score .
Use the full funding limit
To have a health credit score , it is best not to use your funding limit in its entirety.
For example, if you have a limit of $ 3000, do not pay expenses until you reach this amount. On the contrary, it is advisable to use only between 50% and 75% of the limit. When you realize that you are approaching the latter, if possible repay the amount or even a part of it.
Having credit for a short time is disadvantageous for credit rating
The more you borrow at the beginning of your adult life, the less likely you are to have a good rating. It goes without saying that you have no control here. Only time will improve your rating.
On the other hand, even if you have been borrowing for several years, but do not make your payments at the required times, it will not have a positive influence on the rating; on the contrary.
A healthy history of borrowing demonstrates the seriousness and accountability of the individual.
Repeat credit surveys
When you make several requests for close loans, you have a negative influence on your score.
For evaluation agencies, this means that institutions refuse to give you money, or that you have such a high level of debt that you have to borrow frequently.
Your score will be decreased.
If you only use one type of credit, you are hurting your credit rating
Your score will be improved if you use different types of loans, such as a car loan, a student loan and a personal loan , rather than just credit cards fulfilled to their full capacity.
The key here is the balance between the accounts.
This way of using your loans demonstrates that you are able to properly manage your finances.
To have a good credit rating , avoid the five behaviors above.
Even if your score is not high at the moment, you can improve your score . To do this, refund the amounts of your bills before the due date without forgetting and keep low balances on your credit cards.