Getting an apartment can be a challenge if you don’t shore up your credit.
There is not much you can do today without having a solid credit rating. Even getting an apartment to rent can be a challenge if you don’t have decent credit.
It is why most people put significant effort into building their credit. But some factors can harm your credit, with most being of your own doing.
The good news, yet, is that these drops in your credit score are usually temporary. Below, you can find some of the ways you may be hurting your credit. They aren’t necessarily things you do knowingly.
Applying for a New Credit Card
One of the surest ways to lose your credit score is when you pull out a hard inquiry. It [a hard inquiry] is necessary when you apply for a new credit card. You lose a couple of points on your score when requested.
A hard inquiry, you may not realize at the moment, sticks on your report for up to two years. Most lenders, however, only consider inquiries for the last year.
You can avoid such inquiries messing your score by performing reasonable inquiries. Use the preapproval offers that some issuers offer when borrowing. As much as they don’t give any guarantees, they get you halfway to what’s expected for qualification.
Missing a Credit Card Payment
Ensuring timely payment on credit card balance gives you a significant advantage on your credit. When you don’t make timely payments, your score is negatively affected. Remember, your payment history makes up to 35% of your credit score calculation.
Most lenders tend to consider if you paid off your debts in time before offering you credit.
If you had a higher score, it would affect your credit immensely when you miss your payments.
You can, however, bounce the credit up after you miss a payment. It will depend on your history and how well you react to the upcoming expenses.
Charged a Large Purchase to Your Credit Card
Your Credit Utilization Rate CRU is one of the factors used to calculate your credit score. Having a higher one reported to the credit bureaus hurts your credit.
It happens mostly when you charge large purchases to your credit card. Most lenders view you as a risk, primarily when you use too much of your available credit limit at once.
As much as you can spread the payment across a more extended period, the effects remain negative.
Financial gurus recommend that you keep your CUR below 30%. To gain a better score on your credit, strive to keep it below 10%.
Closing A Credit Card
When using credit cards to boost or maintain a higher credit score, ensure you have a larger credit limit. When you close a card, it prevents you from having a higher overall credit limit available.
Closing that old credit card you no longer use may not be such a good idea after all.
Keep in mind; an old credit card can make up 15% of the score derived from your credit history.
So, what if you aren’t using the card any longer. You need to sit down with the issuer to see if you can change it.
For example, there are cards with hefty annual fees that you no longer need. Request the issuer to downgrade it to a card with no annual fees. Also, upgrade your secured cards than closing the account.
Paid off a Loan
Most of your loans thrive on instalments and interest generated from them. The payments you made are the ones that keep credit ratings high. When you pay it off, it usually hurts your credit.
It only applies to car loans, mortgages, student loans, among other instalment debt. You’ll have lost one credit account to your name.
Having a mix of credit accounts for 10% of your credit. It shows the lender that you are capable of handling different types of debt.
Various factors that affect your credit may be within your grasp. But if they aren’t, your credit will recover after the deduction. If it’s your doing, you need to act fast should your credit ever stand to recover