Managing your finances is one of the major steps in leading a comfortable life. A crucial part of your financial life is your credit score. According to the Fair, Isaac and Company (FICO ®) score model, you are said to possess a good credit score if it falls anywhere between 670 and 799. Moreover, this good credit score is what will help you in your future endeavor to buy a new house or a car. So, it is essential that you pay attention to your credit score. Though it takes a significant amount of time and attention on your part to build a good credit score, it takes only a few mistakes for it to go on a downward spiral. Not only would your credit score worsen, but it will also affect your future aspirations. For instance, car loan lenders and even postpaid phone service providers run a credit score check before allowing you to use their services.
If you are inflicting damage on your credit score unknowingly, you need to figure out which of your financial habits are the culprits here. So, avoid doing the following things and keep building up a good credit score.
Usually, people are unaware of the fact that their payment history constitutes 35 percent of their credit score. So, if you are late on your credit card payments, it will inevitably affect your credit score. If you wish to maintain a steady credit score or are working toward bettering it, ensure that you pay all your credit card bills on time.
Though late payment can hurt your credit score, complete non-payment of the credit card bills can have an irreversible impact on your credit score. In fact, each month you miss a credit card payment, it brings you closer to having the account charged off. A complete non-payment of credit card bills is one of the most common reasons for a bad credit score, and it is something that can be easily avoided.
An insatiable need for every new credit card
It is easy to get tempted by the plethora of rewards that are offered by the new credit cards that hit the market. However, being a rewards hound can be detrimental to your credit score. Every time you apply for a new credit card or loan, you will lose points from your credit score. This happens because credit inquiries follow your request for a new credit card, and several credit inquiries in the span of a few months can hit your credit score hard. A bad credit score owing to your desire for more rewards is completely avoidable. So, apply for a new credit card only if you are in dire need of the same.
Having an account charged off
When your credit card company believes that you cannot pay your credit card bills at all, they start charging off your account. The term “charging off” implies that the creditor has given up on you and you are no longer responsible for the debt. Such an account status will be the demise of your credit score.
Nothing can prove more detrimental to your credit score than bankruptcy. Filing for bankruptcy is an extreme measure and will destroy your credit score. What’s more, it even stays on record for the next seven years.
A bad credit score can wreck the plans you have for the future. So, if you are guilty of such credit-damaging habits, it’s never too late to start over again.