Are you trying to improve your credit rating but you’re not sure how? Are you working hard but not seeing an improvement? Here are five common credit mistakes that you might be making. Remember, if you are in debt and need some support, this site can help you see the light at the end of the tunnel and help you get back on track.
Using too much credit
Your debt to credit ratio is significant, and lenders want to see that you are using less credit than you have available. For example, if you need to use $500 and your credit card limit is $500, this will have more of a negative effect on your credit score than if you used $500 but had a limit of $1000. Ideally, try to use less than 50% of your available credit where possible.
Closing your credit cards when they’re paid off
Paying off your credit cards is a great way to increase your credit score, and it might seem natural to close the account once it’s all paid off, but that’s a wrong move in terms of your credit rating. It will decrease the amount of credit that you’re using, and therefore the overall percentage of your available credit you’re using is going to look a lot worse. It may also reduce the average age of your accounts which is another thing that lenders will be looking at.
Applying for credit too often
It can be tempting to apply for different types of credit for various things, but doing so too often will look bad to potential lenders. Remember that this doesn’t just involve credit cards, but also loans, phone contracts, store cards, or credit to buy big-ticket items such as cars. If you are declined a specific line of credit, leave it a while before applying for something else, as you will look desperate and the bank won’t want to give money to you if they think you won’t be able to pay it back.
Not having any credit at all
Having credit might seem like a minefield, and you may think it’s better to just stay out of it altogether, but that is something that will also negatively affect your credit rating and stop you from getting a mortgage. With nothing to go on, lenders won’t be able to see if you’re someone that can be trusted with borrowing money. Be sure to use some credit, but pay it off monthly to get a good score.
Only paying off the minimum payment each month on your credit card
It can be tempting only to pay the minimum, but the more you have on your balance, the more interest you’ll be paying, and the longer it will take you to pay off. Having the same debt over a long period with little reduction is something that the lenders will frown upon so work hard to get those cards paid off if you can.
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