Gem Muzones
Picture this: Excited to move to your dream house, you go to your trusted bank to get updates on your housing loan. Upon arriving, you smile at the loan officer because in his hands is your much-awaited loan approval. And when the loan officer gives back your application, you see a red stamp that says “DENIED!” The reason? Poor credit score.
A credit score is a standard rating which financial institutions like banks use to evaluate your purchasing power or repayment capabilities. It is a security blanket or an assurance that you can repay anything you loan. This is why it’s important to maintain a good credit score and avoid doing things that can damage it.
Here are some common money habits you need to stop doing to not hurt your credit score big time:
- Missing due dates
Whether you pay for it in half or full, habitually missing deadlines can give you a bad score. In fact, 30% of your rating is your payment history.
- Maintaining high credit balances
Just because you have a high credit limit does not mean you need to max it out every month. Banks look into your level of debt to determine your credit score.
- Always paying the minimum
If you always pay the minimum amount due and never in full, your debt can increase through interest. This could give banks the impression that you are incapable of paying the amount you have loaned.
- Having several cards or loans
One of the biggest mistakes you must avoid is applying for a loan to pay off a debt. This shows that your main source of income is insufficient, causing you to rely heavily on credit to sustain your cost of living. If you badly need extra cash, try pawning your items at pawnshops since it has no effect on your credit report.
- Not having a savings account
You might have received a pre-approved credit card or an offer to acquire a loan at a low-interest, but having only one type of account could spell trouble for you. It is important to maintain a savings account so that banks can establish your credit profile and history accurately.
- Closing accounts with liabilities
Canceling a credit card before clearing out its accumulated balance can take a toll on your rating. Even though banks can waive the fees, any good rating granted to you can be removed.
- Negligence
It might take the time to realize when someone has racked up thousands of debt under your name, so make it a habit to double-check billing statements. It does not hurt to protect your credit card from hackers.
When you invest in maintaining a good credit score, banks become confident about investing in you. Having a high credit score means lower risk for them. They can help you purchase your dream house or car without having to spend every cent you have saved. Start by practicing good money habits and everything will follow.
