Ruining your credit score doesn’t take too much effort, as opposed to building it up. A damaged credit score poses a lot of troubles, especially if you’re looking to take on a loan for a business or a house.
In Australia, if your score is above 700, then you have nothing to worry about. Most banks don’t require a perfect rating.
Let’s see how you can avoid lowering your credit rating. Also, we’ll see how you can ensure that your future loan application won’t be denied.
#1 Skipping Payments
Sometimes, we skip payments not because we’re short on money, but because we simply forget to send lenders the check. We don’t do it intentionally, and usually, we remember this after a couple of days and fix the situation.
Although our intentions might be good, this is exactly how a damaged credit score is created. First, we miss a payment for a few days, then forget altogether. Meanwhile, lenders will take note of our behaviour and before we know it, our credit score has gone down.
#2 Switching Lenders for a Better Deal
We all know that a better deal that’s just around the corner is extremely appealing. Sometimes, they come with a lower interest rate or allow us to take a bigger loan. However, you should know that deciding to close and open up bank accounts isn’t regarded with kind eyes by financial institutions.
Closing an account as soon as your loan is paid off tells creditors that you are not a reliable and trustworthy client. This will bring in the position of getting a damaged credit score.
#3 Increasing Your Credit Line
It’s true that a credit line isn’t a loan, so we don’t have to explain to anyone what we’re purchasing with the money we get. Still, a credit line comes with advantages and disadvantages.
The banks consider that it’s acceptable to spend between 10 and 30% of the full amount, but anything that exceeds 50% leads to a damaged credit score. Think of the credit line as a secure line. If you don’t actually need it, don’t use it.
#4 Taking on Loans to Raise Your Credit Score
Getting a personal loan and paying it back will actually improve your rating. Taking several types of loans and repaying them will do that as well. But there’s a small difference between actually knowing what you do and getting swallowed by debts.
Avoid borrowing money just to see your credit rating going up. The chances are that you’ll end up with a damaged credit score due to not being able to afford the payments and fees. And in case your credit score is low due to false negative ratings, you can speak to a credit repair expert to remove those negative listings and help you raise your credit score.
Learning how you can avoid a damaged credit score will give you the opportunity to apply for a loan when the need arises. Being able to take on a standard loan, with a fixed rate and a decent interest rate is easier if your credit score rating is in shape.
Remember to pay your bills on time and don’t spend more money than you have!
