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5 Actions You May Not Realise Harm Your Credit Score

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what can harm your credit score

There’s no denying the importance of a good credit score, especially as the focus on good credit only continues to increase when it comes to the essential purchases and decisions, e.g. needing funds to start a business.

Today, maintaining your ideal credit rating opens up investment opportunities. It also takes care of the situations that now require it, e.g. getting a credit card, a mobile plan, and securing a place to rent, to name a few of the more common instances. Service providers ask for more data before they agree to do business or with a supplier or a customer. Business owners are aware of the more significant intrusion and qualifications; however, most Americans have little to no idea of its occurrence.

One study found that 32 percent of Americans have never obtained a copy of their free credit report. Is this suggesting they’ve not got a mobile plan or rent a home? No, it’s more than likely they’re blissfully unaware that the credit checks have occurred. However, ignorance is not bliss when the credit rating needs to near perfect for the bigger investments like funds for starting a business or to invest in an existing business as a shareholder.

Check your credit report when you don’t actually need it, so it’s in good health when you need to rely on it.

Five Actions That Can Harm A Credit Rating

1. Closing an account at the wrong time

While this action seems a bit ridiculous, you need to time when to close an account used for a loan. Closing your account too soon after you’ve paid off the balance can harm your loan accounts like credit cards. It may be that you paid off the loan on one account by transferring the balance to another account, and then you promptly closed the nil balance account. While this is a logical step to take, it’s the timing of the account closure that can harm your credit rating.

2. Transferring your balances over to one card

Debt consolidation, we’ve all heard of it, and it’s not only a convenient solution, but you also benefit from a better rate of interest, so over time, you’re paying less money in interest payments on the loan amount. Many lenders, including the big banks, advertise this strategy to reduce debt; however, if you still need to borrow funds now all your debt is loaded onto one card, you can appear as a high-risk borrower, which impacts your credit rating.

For your credit rating, did you know you’re better off spreading your borrowing over a few credit cards, so each card has a maximum of 30% owed than it is to have one card up with a high credit limit, and you’re using most of it? Therefore debt consolidation may not be a great move for you if you rely on your current credit score.

3. Keeping charge-offs on your credit report

A charge-off is a debt that the creditor deems unlikely to pay off because you’ve failed to meet your monthly payments for a significant period.

The account is listed on your credit report as not collectable, where it will remain for seven years, potentially impacting your credit. However, you can sometimes remove your charge-offs before the seven years is up.

4. Falling behind on medical bills

You might not realise that, if you’ve had a medical bill sitting waiting to be paid for some time, that bill will ultimately be sent to a debt collection agency to deal with. That can harm your credit, so try to make medical bills your priority if you have a habit of falling behind on payments.

5. Never use your credit card

Never needing a credit card should be a sign all is going really well with you financially. However, you need to use credit and have a good payments history to get a high credit score. Use your credit card and pay the balance every month. You now have a payment history and zero debt.

Technology has made it easier for all companies to tighten their requirements for doing business. Consider your borrowings and payments history and check out your credit score regularly if it is in good form for when you really need it.