Want To Improve Your Credit Score? Avoid These Common Mistakes
Let's take a look at some of the common mistakes you should avoid to maintain a high credit score.
A strong credit score is a vital indicator of your financial health and how you manage the money. Credit score has become the most crucial factor in your financial journey these days as it facilitates the access to a new personal loan or credit card.
You can secure many offers for various credit instruments with a healthy credit score. A low credit score can lead to several problems, like rejection of loan applications or high interest charges on new borrowings. So, it's important to always maintain a healthy credit score.
A credit score is a three-digit number, generally ranging between 300 and 900, that reflects an individual's financial health. Most lenders approve or reject personal loan applications based on the credit score of the borrower. Let's take a look at some of the common mistakes you should avoid to maintain a high credit score.
Not Paying Bills On Time
Not paying your bills on time can harm your credit score. Credit rating agencies use your payment history when creating a credit report and finalising the credit score. Even if you miss a payment by more than a month, your credit score may suffer.
All the banks and non-banking financial companies report to credit bureaus about the payment status of all active personal loans and credit cards every month. Any non-payment of dues within the specified deadline will negatively affect your credit score.
High Credit Utilisation Ratio
The credit utilisation ratio refers to the percentage of your total available balance against the credit limit approved by the credit card issuer. According to financial advisers, a credit utilisation ratio up to 30% could help you maintain a healthy credit score. A high credit utilisation ratio on your credit cards will bring down your credit score.
Multiple Credit Applications In Short Duration
One of the common mistakes that might lower your credit score is applying for loans or credit cards from multiple lenders in a short duration. It shows credit-seeking behaviour, which may impact your credit score.
Not Checking Credit Report Regularly
It's important to regularly track your credit score reports to avoid any errors or discrepancies. If you notice any incorrect information in your credit report, immediately raise an objection with the credit bureau and the lender. Wrong credit reporting and non-closure of loans despite making full payment, will affect your credit score negatively.
It's not difficult to maintain a high credit score or to improve your credit score. With a little planning and financial discipline, you can easily improve your credit score.
