People are always talking about the best ways to improve your credit score, but it’s just as important to know how to prevent it from any damages. This is how you can do it:
It’s always necessary to have a good credit score; it’ll help you in many aspects of your life. You can build it from scratch, or rebuild it after a rough time, for which you’ll need to know what most people do wrong, and learn from it.
The biggest mistake to avoid is paying your bills late or inconsistently. Your rent and other service payments should be made on time, or you risk damaging your credit score. The key is to be organized around your bills; if you know when you need to pay them, you’ll be able to do so.
Being late on medical bills can also hurt your score. However, credit-reporting agencies are being less strict on this aspect and these debts are reported after a 6-month waiting period. This shouldn’t be a reason to be late on medical bills, though!
When it comes to the role of credit cards, there are several possible risk situations. For instance, your score can be lowered if you apply for many cards in a short period of time. This includes those from rental stores. The reason why it’s simply that you’ll be seen as s high-risk borrower if you’re in such need for credit.
On the other hand, closing most of your credit card accounts won’t help your score’s total either. In fact, this is one of the myths about credit scores that you shouldn’t believe. To calculate your credit score, there’s something called a “credit utilization ratio”, which is basically the percentage of used credit within your available total. This means that your percentage will be higher if your total is lowered, as will happen if you close many accounts.
There are other specific situations when your credit score might be at risk if you make a bad decision. For example, a car rental reservation: if you choose wisely, you can avoid a credit inquiry. You simply need to use a credit card to confirm the reservation and settle the final bill with a debit card. Using the last one for both actions is one of the many debit cards’ dangers.