Credit Score Dilemmas And Bad Habits

We all know that bad financial habits will hurt us in the long run

. Not keeping track of our spending, neglecting to take advantage of the new tax-free saving account or simply not fulfilling promises to top up our personal savings each month are only a few of the common errors we make. Although these particular bad habits may not be detrimental to our credit ratings, there are many other habits that are.

The most common amongst bad habits is not paying bills on time or skipping payments altogether. If you are delinquent on any bill that is sent to credit agencies, these late payments and no payments are updated on a monthly basis. This means potential creditors will see this information immediately. If you're not able to pay off an entire balance, it's important to make the effort to pay at least the minimum requirement. Late payments can stay on your record for up to six years.

Carrying large balances on things like department store cards and credit cards is seen as a red flag to many creditors. If you're constantly maxing out on your limits, this is viewed as risky and many lenders will decline your application. At most, you should not be using more than 80 per cent of your limit. If possible, it's better to stay around the 30 per cent to 50 per cent level otherwise your credit score could take a serious hit.

Closing old accounts is not as good of an idea as one may think. If you have an account that is old but unused, it may carry a great credit history for you that could be beneficial down the road. Perhaps you have an active credit card from a few years ago that you never use. Keep it. Unused credit is a boost to the score. On the other hand, applying for too much credit is a quick way to damage your score. With so many offers of freebies for signing up, it can be tempting, especially for University and College students. Each time you sign up for a credit card just to get the t-shirt, you are doing damage to your credit history because each time you apply for a new card, a hard inquiry is done against you, which will show up on your credit report. Too many inquiries many lead lenders to think you are credit-seeking and turn you down for a loan.

Never ignore your credit report. It is a good idea to check it once or twice a year for any discrepancies or wrongly reported information. It does not cost anything to request a credit check from Equifax by mail. If any large purchase is in your future, now is a good time to clean up your credit.

by: Molly Wider

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