The credit score that follows your spendings habits follows you for a long time. As BusinessInsider says, “It is used as an indication of trustworthiness by lenders, who use the number as a way to help predict how you’ll treat their credit line based on your financial history.”
That credit score can influence lenders when you apply for a car loan, a home mortgage, a favorable interest rate, and more. You must be making mistakes that affect your score, so are you unknowingly sabotaging your credit score?
Here are 7 things that may be lowering it without your even knowing:
- No credit balance. You’d think that having no outstanding balance would be a favorable thing. But, without credit cards, you have no credit background.
If you worry about running up credit card debt that would affect your credit score, you can apply for secured credit card. You must put down some money as collateral for a secured credit card, but it will be convenient for shopping and build a credit record.
- Charge-Offs. If you owe money on a credit card and have not made payments for some time, the credit card will decide on a “charge-off” because they have given up on your making your payments.
Your credit score will drop with a charge-off, and the balance after the charge-off remains part of your credit score data.
- Co-Signing Loans. When you co-sign a loan for a friend or family member, your credit history is at the mercy of their good payment habits. You would do better to urge them to consider a “bad credit” loan.
Lenders offer “bad credit” loans without the fuss, process, and delays at banks. These type of loans should be taken out only for emergencies. When considering high-interest loans, you must make sure if you can pay back the loan on time.
- Nuisance Bills. There are those bills you just don’t think about as debts. For instance, libraries are using credit collection agencies to close in on people who have ignored their late fees.
This is also true of unpaid medical bills and traffic tickets. Any evidence that you do not honor your obligations may affect your credit history.
- Credit Card Usage. It’s no surprise that your credit card debt affects the credit record. But, how you use the credit cards and don’t use credit cards can change your score, too.
It might surprise you that trying to rent a car without a credit card will prompt a credit check. And, each credit check affects your score negatively.
Are you unknowingly sabotaging your credit score?
Writing for Forbes, Lauren Gensler says, “You know your credit score is important, but are you clued in on what you might inadvertently be doing to sabotage it?”
Now, everyone has occasionally missed a payment, and most people have been late on payments from time to time. Some people are careless about their obligations, but some simply fall into a credit bind because of unforeseen circumstances and things beyond their control.
Having a low credit score does not mean the end of your world. You can improve it with focus and discipline. But, you should understand what can happen without your even knowing it.