Maintaining a good credit score is very important to get a loan approved quickly and easily. But it's not easy to keep a good credit score as even a little mistake can harm your credit score. There are some common mistakes that people often make it affects their credit score.
Here are a few mistakes which you can avoid:
- Avoid delaying repayments: If you miss a due date for the repayment of your credit card bill or you fail to pay EMIs on time, this can hurt your credit score. Every time you miss a payment or you are late in making a payment; your bank reports it to the bureau. Although one or two missed payments might not affect much, but if you do it frequently, it will affect your credit score. Setting a reminder for yourself around the due date might help you remember your repayments. Or you can even instruct your credit card company or your EMI provider to automatically deduct the amount from your bank account (i.e., opting for auto-payment).
- Keep away from high credit utilization: Staying updated with your credit utilization ratio is an important aspect. That helps the lenders determine your creditworthiness. Your credit utilization ratio tells the percentage of the credit available to you that you are currently using. The more available credits you use at a time, the more it decreases your ability to repay your debt on time. AAlso, to lenders you come out as a person who is "credit hungry."
- Don't apply with multiple lenders: When you apply for a loan, the lender will get access to your credit details which will be reported on your credit report. The lenders need to check your credit score before they process your loan application and hence the credit inquiries. And credit inquiries have an impact on your credit score. If you apply with multiple lenders, each of them pulls your credit report, which brings your credit score down.
- Check your credit report at regular intervals: To be aware of any error or increase-decrease or any changes due to your recent loan transactions, you should keep a regular check on your credit score or credit report. Mistakes in your credit report might harm your credit score. Hence it is wise to keep checking your credit details regularly.
Avoid impulse purchases using a credit card: Even though credit cards are easy to handle and manage then cash, it can bring you down to a financial crisis if you are unable to make proper use of it. If you use the credit on your credit card frequently, and also the credit utilization rate is really high as per your credit limit, then it will drastically decrease your credit score. So, one should keep in mind to make proper use of their credit card and not use it for frequent purchases.
Keeping these few tips in mind can help you avoid making mistakes that often negatively impact your credit score. Always keep a check on your credit report and other financial details to avoid any inconvenience regarding your credit score.