There are quite a few missteps that a person can make to hurt their credit without even realizing it. If you want to improve your credit as much as possible, it is very important that you know what to avoid doing. Your credit score is a very delicate thing, and you need to appreciate that or risk the consequences. The more cognizant you are about your actions, the easier it will be to maintain good credit throughout your life. The better your score is, the less resistance you will face when trying to obtain a loan in the future.
Closing Your Credit Accounts
While closing your old credit accounts might seem harmless enough, the fact is that doing is actually a really bad idea. You’ll want to keep all of your credit accounts open so that your score doesn’t suffer. Closing old accounts can damage your credit quite a bit. This is something that not enough people realize, but it is crucial to keep in mind. You might be tempted to do this if you have a problem with credit card spending, but it will only work against you.
Applying for In-Store Credit Cards
These days a lot of retail businesses offer their own credit cards, offering discounts just for applying. This is generally a bad idea, because your credit will suffer every single time you apply for one of these cards. These applications require a credit check, which counts as a “hard inquiry”. It is definitely not good for the overall health of your credit, so you should avoid doing this as much as possible.
Being a Cosigner on a Loan
You should also try to avoid being a cosigner for someone on a loan. If someone you know has asked you to act in this capacity for them, you should think twice. You will be left to pay for the entirety of the loan if the borrower cannot cover it for any reason. This is a huge risk that you might not want to take.
Being Late on Loan Payments
If you take out a loan yourself, you will need to make a point of paying back the full amount on time. It is crucial that you take this seriously, because it can have a major impact on your credit score. Being even just one day late on any loan will inevitably take your score down quite a bit. It is a good idea to set up automatic repayment with the lender so you know that the money you have borrowed will get paid back to the lender on time. A lot of people are taking out short term loans online, but it is a responsibility you have to take seriously.
Letting Regular Bills Slide
It might not seem like being late on your utility bill sometimes is a big deal, but it can do a lot of damage to your credit. When you consistently pay all of your recurring bills on time, you’ll find that your credit score increases. If you do not already have these bills set up to get paid automatically, you should really do so. This way you won’t have to deal with late fees and problems with your credit because you forgot to submit payment on time.
Opening Too Many Credit Accounts
When you open a lot of new credit accounts within a short period of time, your credit score will most likely go way down. You need to be very carefully about this, because it can have some serious consequences. This is something that will not look good to lenders when you apply for a loan of some time.
Failing to Manage Your Credit Utilization Ratio
You also need to make sure that you utilize just the right amount of your available credit. It is not a good idea to go over 40%, because it can reflect poorly on your credit report. Some people use as much of their available credit as possible, which usually results in a much lower score than they would like. While it is not something that occurs to a lot of people, it is still very important to remember nonetheless.
It’s always a good idea to keep a close watch over your credit so you know what it is like throughout each year. Read through your credit report at least once every year as well. There is a chance that you could find some items on your report that were put on it in error. Sometimes things that should come off stay on, in which case you need to get it taken care of. If you ever notice any errors with your credit reports, you should notify the credit agency immediately. This way your credit score does not suffer unnecessarily.