Are You Damaging Your Credit Score Without Knowing It?

A credit score is simply a mirror of your financial habits and health. Your credit score significantly defines and impacts your overall financial health. It determines how much money you will be able to spend on paying interest and fees in your life. It can even impact your ability to take loans or credit.

A good credit score will ease you out in securing good loans and credit cards at better rates and terms. At the same time, lower credit scores will pose a challenge and will likely cost you more.

But in today’s world, there are ample ways we can hurt our credit score rather than improve it.

Making your credit score worthy

The good thing is that you can control your credit scores up to a limit and progress over time.

But in some cases, some ways will hurt your scores without you knowing it and hence are essential to understand. Many people take bad credit car finance in Ireland and go for loans to build up their credit score.

Some practices which would hurt your credit score.

There are multiple beliefs or practices that you follow for your benefit. But you are not aware that these habits might negatively impact your credit score.

1.  Exhausting your credit card limits every month

There is a case in that you are responsible, and you pay your bills every month on time and never miss out on the payments, but you continue to exhaust your credit card limits every month.

This can become a big problem for your credit score as credit utilization plays an important role (30%) in making up your overall score. Credit score calculations consider the potential risks of borrowers who are constantly maxing out their card limits.

Hence it is a good idea to keep lower credit card balances and not exhaust your limits every time.

The ideal credit utilization rule says that you should try and keep your credit balance up to 25 to 30% of your total credit limit to achieve the best results and help improve your credit score.

2. Finishing off your old credit card accounts that you no longer use

The average length of your credit history is another factor that impacts your credit scores and holds about a 15% role in your total score.

It is essential to know and understand that closing the older accounts, which are not much in use, may seem like a good idea. Still, be aware that closing all accounts can also reduce the available credit amount with you. Hence, it will surge your utilization.

Instead, consider keeping the old credit card accounts open while keeping those cards in safekeeping. This way, these accounts will add to the average length of your credit history and help you improve your credit score in the long run.

3.  Not checking your credit reports periodically

Identity theft has become common these days, and marketing strategies aiming at consumers leading to such frauds and thefts are on the rise. New account fraud is one example where someone opens an account using your private information.

Checking your credit reports periodically is the best way to know if you are becoming a victim of such theft or fraud and can prevent you from such misdemeanours.

Failing to do so, you could be an easy victim of theft, and on top of it, you would not even figure out for months or even years. The good thing is that you can now check your credit reports from all the credit reporting agencies once a year from their websites.

4. Getting new credit cards

You might be tempted by the enormous bonuses and rewards that you may get with opening new credit cards. There is nothing wrong with making new cards and using them to get rewards.

While applying for new credit cards, queries are made to check your credit report. Using multiple cards sometimes leads to a slight drop in your overall credit score. This will eventually make it difficult for you to qualify for better-rate loans and credits in the future.

Hence always keep a check on the number of credit cards you keep. Better to discard the ones you are not using while buying new credit cards.

5.  Becoming a Co-signer for Someone

Co-signing for a loan for someone else you know is fine, but it can become a challenge if the person you are betting on doesn’t keep up the promise at the end of the deal.

Remember that when you co-sign for a loan for someone, you also become responsible for the repayment of that loan. If the original borrower of the loan, for any reason, is not able to keep up the promise of repaying the amounts, your credit score will quickly take a hit.

Especially in the scenario when the other person fails to repay the money, your credit score will suffer. Hence this seems another good reason to keep checking your credit reports periodically.

Some people borrow easy loans in Ireland and make their partners co-signer. This can become a problem for their partner if the loan is unpaid for a specific duration.

6.  Missing paying bills on time

If you are under the impression that you can delay paying your credit card bills once in a while and it won’t become a big deal, you’re entirely under the wrong impression.

Payment history is an imperative factor which makes up your credit scores. It contributes approximately about 35% to your total scores. This means even a single late payment can cause damage to your score. And multiple or repetitive late payments will harm it even more.

What you must do is make a practice of paying your credit bills early or at least on time every month. Keep a check or reminder on the payment date and follow it religiously. If you aren’t taking your bills seriously and delaying paying them on time, you will end you regretting it.

Conclusion

These are a few of the simple mistakes which we have outlined, which happen because of inadequate knowledge and put a dent in your credit score. Treat it with care so that you will likely benefit from it in terms of getting better loan rates and terms in the future.

Some necessary steps to help you are paying your bills early or on time at max, keeping debt to a minimum, keeping the number of cards limited, refrain from opening/closing many.