Source – Unsplash – Patel Czerwinski
Credit ratings are important because they allow you access to borrowing services like mortgages, loans, phone contracts, and credit cards. So, if your credit rating is below par, you’re at risk of missing out on the services you need.
Would you like to get your credit rating in better shape? Here are five things you definitely want to avoid:
1. Borrowing More Than You Can Afford
Excessive debt is a real no-no if you want to improve your credit score. Getting into trouble with money can lead to legal marks against your name which will stay with your credit report for years.
Use handy options like payday loan alternatives rather than high-interest short term loans to get the money you need. Most importantly, get any debt paid back ASAP.
2. Applying For Credit Regularly
When you keep applying for credit, it blemishes your credit score because it seems as though you rely on credit to get by. Every credit application, no matter how big or small, will be recorded in your report. Ideally, hard searches should be spaced out every three months, but ideally every six months or more. If you are unsure whether or not a company is going to do a hard or a soft search, it’s essential that you ask before making the application.
3. Keeping Unused Credit Accounts
If you have no debt, but you still have unused credit accounts, you should get rid of them as they will suggest you are unable to cope with any more credit. Even if the accounts have been sitting there unused for years, at a glance, it looks as though you don’t have financial space for more loans or credit cards.
Potential lenders don’t really look any further into your credit than a glance, so don’t expect them to assume that these credit accounts are paid off and sitting unused. They have neither the time nor the inclination to put that much imagination into their decision-making process.
4. Maintaining Delinquent Accounts
A delinquent account is an account that has been in arrears for two years or longer. If you fail to clear a delinquent account, it may tarnish your entire credit score for seven years. Because they stick on your report for such a long time, getting rid of delinquent accounts should be a priority if you want to improve your credit score.
5. Getting A Default Account
It’s important to stay in touch with organizations you owe money to, regardless of your situation. This contact (especially if it involves the creation of a payment plan) will prevent your account from being turned into a default account.
Default accounts are declared when the organization has decided there is no way you will ever repay them. This tarnishes your credit report, and to give you a timeframe, it tends to happen after a few months of payment requests being ignored. There is always time to prevent this financial nightmare from happening, even if you’re paying back the minimum amounts.
Getting a good credit score is completely achievable, but only if you are savvy and stay on top of your financial activity. Sometimes the first step is being honest with yourself about what needs to happen, and that first step is usually the most difficult. By following our tips above, and gathering all the right information, you’ll have your credit score in great shape soon, and a much better financial future ahead of you.
