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10 Surprising Ways You Are Damaging Your Credit Score

When you are struggling financially, it will be obvious why your credit score will have gone down. After all, if you are defaulting on loans and you have maxed out all your lines of credit, you know that it is going to impact on your credit rating. However, if you have recently checked your credit and you have a lower credit score than you expected, the reasons why may not be so apparent. So, on the next page there are ten things that you may have done that could have lowered your credit score.

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Credit Score
10 Surprising Ways You Are Damaging Your Credit Score

1. Not Checking Your Credit Report for Errors

The reason why your credit score has fallen may not be your fault at all. A survey found that one in every five credit reports contained errors. You can get a credit report from each of the credit bureaus every year free of charge. So, it is a good idea to regularly check your credit reports from all three of the national credit agencies, which are Equifax, Experian, and TransUnion. If you see any errors on the credit reports, notify the relevant credit bureaus immediately.

2. Not Getting Around to Paying Your Bills on Time

Everyone gets busy and forgets to pay their bills sometimes. However, your payment history accounts for up to 35% of your credit rating. All the other tips that you can find on how to improve your credit score will be of little help if you consistently pay your bills late. So, get into the habit of paying bills the moment they arrive whenever you can afford to.

3. Maxed Out Credit Cards

The amount that you owe comes a close second to the timeliness of paying your bills in the calculation of your credit score. However, it is not only the total value that you owe that you need to consider. The proportion of your available credit that you have used is equally crucial to your credit rating. The worst offenders in respect of credit utilization are credit cards, which are known as revolving credit. Experts say that it is best to keep your credit utilization at around 30%. If you go over 30% credit utilization, you will be damaging your credit score.

4. Not Having Enough Types of Credit

Lenders like to know that you can manage multiple types of debt. So, what is known as your credit mix will affect your credit rating. If you have store cards, a mortgage on your house, a car loan, and credit cards, and they are all being managed well, that will help your credit score. Having only credit cards, though, could adversely affect your credit rating.  

5. Lowering Credit Limits

You may have thought that asking for your credit limits to be lowered on credit cards would be a prudent course of action to take. However, as mentioned previously, your credit utilization is a significant factor in your credit score. When you reduce credit limits, you increase your credit utilization. So, your efforts to help you control your spending will have lowered your credit rating.

6. Cancelling Credit Facilities You no Longer Need

The credit utilization issue can hit you gain if you cancel credit facilities that you no longer need. By canceling an unused credit card or overdraft facility, you reduce the amount of credit you have available to use. Therefore, you are increasing your credit utilization. While that may sound counterintuitive, that is how the system works. So, your credit score will be higher if you cut up your unwanted cards and never use them again, but you keep the unwanted accounts open.

7. You Consigned a Loan

If you helped someone out by consigning a loan for them, that would influence your credit rating. If the other party makes all the loan repayments on time, the cosigning of the agreement could improve your credit score. However, if the other party fails to repay the loan on time, that will adversely affect your credit rating, and often you will be unaware that the person has been making the loan repayments late.

8. Applying for New Credit

Every time you apply for new credit, it will make a dent in your credit score. So, when you are shopping around for a loan, if several lenders may make a credit inquiry against your name, the drop in your credit score could be significant. What catches some people out is that phone companies and broadband suppliers may also make a credit inquiry when you inquire about a new contract. So, try to limit the number of times you apply for anything that might involve granting you credit.

9. Setting Up New Credit Accounts

Setting up a new credit facility will have an immediate adverse effect on your credit score. Then, over time, if you keep up the repayments and you keep your credit utilization low, your credit score will gradually increase again. An established credit facility that you manage well will improve your credit rating, though. So, this is another reason why it is best not to close unused credit accounts if you might need the facility again in the future.

10. Unpaid Parking Tickets and Utility Bills

If you fail to pay a parking ticket or a utility bill, your debt will be passed on to a collection agency, and that will be reported to the credit bureaus. Unpaid child support payments will also be reported. So, it is not a good idea to throw your parking tickets on the back seat of your car and forget them. Don’t forget to pay your final electricity bill when you move home, either, and make sure that you pay the ex the agreed child support payments on time.

Conclusion

Avoiding the 10 things that are damaging your credit score will help you maintain your credit score. But the list is not exhaustive. So, the best way to stay on top of your credit rating is to review your credit reports regularly or pay for a credit score monitoring service.

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