The irony of checking the credit score and finding out that it is certainly not up to the mark is a distressing situation. As the score calculation process is too complex, it is difficult to recognize certain credit behaviours in which one may have engaged unknowingly and thus ruined a perfect score. A lower credit score means the society might view the person less favourably, and he/she might be charged more interest than the others when borrowing money.
Five easy ways to ruin a perfect credit score:
- Missing a payment: Late payments are a strict no-no when one requires keeping a respectable credit grade. Payment history has the strongest impact on your score, missing any payment, whether it is on credit card, mortgage or any other loan might have a considerable impact on the credit history. Nevertheless, how much a missed payment can affect a credit score, depends upon multiple factors like how severe it is, how late or how early the payment was made and how frequently a payment is missed.
- If any unpaid account was sent to collections: A continuous miss in payment could be sent to collections, and this may negatively impact the score. It is also significant to cognize that the higher the credit score, the more stops it could sink. Lack of payment could be sent to a collection agency and can reflect in credit reports.
- Opening too many accounts: Though it is good to expand credit portfolio, opening multiple accounts in a short timeframe can destruct a credit score, this is because each time a new account is opened it shortens the average account life.
- Erroneous or outdated information on the credit report: Sometimes due to the mistake of lenders the credit report might get affected. At times, the lender might incorrectly report the account information it could be a case of mistaken identity or fraud. Either way, an error can leave out your credit score to a considerable degree and make a substantial impact on your borrowing power. To keep a check on the score it is important that an individual reviews it at regular intervals.
- Charging too much on the credit card: Credit card is your debt-to-credit ratio and is also known as the credit utilisation rate and informs the lender about how much of available credit is an individual using. Thus, lower debt-credit ratio is a sign of a more positive credit score. Experts say keeping the credit utilisation rate to 30 percent or less offers a more attractive picture to the lenders.
Closing a credit card might reflect on the credit score too, all in all, a good credit score is more like a disciplined life. It is all about remembering to pay your bills on time and to maintain that for the rest of your life. A tarnished credit score is both pricey and stressful, but however, it is not the end. There are things that can be done to improve it and thus, the blemished credit will not last forever.