17 Traps that Could be Harming your Credit Rating

17 Traps that Could be Harming your Credit Rating

Your credit rating is incredibly important, especially when it comes to borrowing money for large purchases such as a new home or a new car. You’ll want to keep your credit rating as high as possible to be able to prove to lenders that you are a good candidate for receiving a loan.  A poor credit rating can seriously affect your chances of borrowing money and getting the best interest rates on loans.  Watch out for these 17 common traps that people often fall into – resulting in poor credit rating and long term problems.

Not Being on the Electoral Roll – Yep, it’s so simple but if you’re not on the electoral roll you may have already harmed your credit rating. Register to vote with your name, address and full details today to instantly help yourself.

Having Multiple Retail Store Credit Cards – Most major stores now offer credit cards and often encourage you to sign up to these with introductory gifts or offers. Ask yourself if you really need this – having too many cards simply increases your chances of missing payments or forgetting unpaid debts.

Not Paying Off Your Credit Card – The balance of your credit card should be paid off monthly. This helps you to keep on top of all your debts and stops things from spiralling out of control. Pay off any outstanding balances as soon as you can.

Having a High Credit Utilisation Record – A lot of people don’t know about this. The ratio of how much credit you’re using in relation to the credit you are approved for is used by lenders to see exactly how much credit you’re using. The ratio should ideally be as low as possible – aim for 25% or below.

Having Outstanding Medical Bills – It’s not just unpaid credit cards or loans that can affect your credit rating. Bills such as medical bills should not become outstanding and it’s really important to pay these off as soon as you can.

Spending Beyond Your Means  – This is simple. You should only spend what you can afford. If you can’t afford something that day, don’t be tempted to put it on a credit card unless you are 100% certain that it will be paid off by the end of the month.

Not Learning the Basics – Too many people get credit cards or apply for credits without understanding or questioning basic information. You should always know the rate of interest that you’ll be paying and the terms of your credit. In addition, always be aware of any fees involved.

Having Too Many Credit Cards – Try to minimise the amount of credit cards you have – this could be to as little as one or two. By doing this, you’ll be able to keep track of exactly what you owe and to whom – always paying it back in the time required.

Not Budgeting Properly – It’s very common to find people with poor credit rating which has occurred simply from a lack of budgeting. They’ve spent far more than they earn – leading to a situation where they have had to apply for credit which they can’t afford to pay back. This simply leads to further, larger issues.

Not Having a Permanent Address – Although this could be caused by circumstances beyond your control, not having a permanent address can really harm your credit rating. If you are renting, always make sure you have official documents which you can show to a lender to prove you have a fixed address.

Moving or Losing Jobs – Again, although this can sometimes be hard to control, erratic job movements will raise alarm bells for potential lenders. Help your credit rating by staying in one job for a prolonged amount of time and keeping your payslips as evidence of a regular income.

Having a Financial Partner with Finance Issues – Unfortunately, if your financial partner (with whom you may have a joint account or a joint mortgage) has a poor credit rating, this will affect you also. If this is the case, it’s important to try to disassociate your finances from theirs as soon as you can.

Having Unpaid Bills- We’ve covered unpaid medical bills but what about utilities or other bills? These absolutely must be paid on time – try to set up a system whereby as soon as you receive the bill, you action it immediately. If you are charged on a monthly or quarterly basis, set up reminders on your phone or computer so that you don’t forget!

Making Too Many Credit Applications – Each time you make a credit application, the lender will do a credit search on you. Multiple searches will raise alarm bells so try to only make credit applications when you really need to.

Having Open But Unused Accounts – Even if you’ve cut up that old credit card you no longer use, doesn’t mean the account is closed! Make sure you go through all the stages necessary to close unused accounts properly. This includes old mobile phone contracts too.

Not Being Aware of Your Credit Rating – Again, this goes back to basics. You can easily find out your credit score – and you can often pay to find out a little more in depth information. By doing this, you’ll have the information required to speak honestly with lenders.

Trying To Do It All Yourself – There’s no reason why you should understand this all yourself. There are many extremely helpful and reputable companies out there who can help to advise you on improving your credit rating and help you get exactly what you need. Ask for help when you need it – you’ll end up saving time and money.

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