Credit Score Killers: 7 Things Dragging You Down (and How to Fix Them)
When it comes to improving your credit score, you have to pay attention to a lot of aspects at once. This task is difficult to begin with. But it gets even harder if you don’t know the basics of credit score maintenance. With that being said, you only need to learn a few common tips to maintain a good credit score without excessive stress.
To help you through this challenge, here are 7 things that drag down your credit score and how you can fix them.
1. Not Making Payments on Time
While there are several benefits of buying groceries with your credit card, you need to remember that you also need to repay the amount by a set date. Otherwise, late payments can take a toll on your credit score.
How to Fix It
You simply need to remember the due dates for your credit card and loan payments. If you face problems doing that, you can turn to solutions like a reminder app to make your payments on time.
2. Not Keeping Tabs on Your Credit Report
All your credit-related actions are reported to three credit bureaus for your credit report. If you don’t monitor your credit report, you may not know which factors are dragging down your credit score or how you can improve it.
How to Fix It
You can resolve this problem by simply signing up to get your free annual credit report from one of the bureaus. From 2023, you can also get free weekly credit reports for regular monitoring.
3. Not Disputing Errors on Your Credit History
The entire point of getting a credit report is to make sure that you can identify any errors and discrepancies on it. If you don’t dispute misreported instances, they continue being a stain on your credit score.
How to Fix It
You can file a dispute with the credit bureau that reports incorrect information on your credit report. You can practice writing a strong but concise message on a note taking app before submitting it.
4. Using Too Much of Your Approved Credit
Your credit utilization ratio is determined by the percentage of approved credit that you use at once. A high credit utilization ratio can show lenders you aren’t a reliable borrower and drop your credit score.
How to Fix It
You should make it a point to use only 30% of your approved credit at all times. For best results, try to keep it below 10%. Alternatively, you can try saving money in a high-yield savings account to be ready to cover emergencies and big purchases.
5. Reducing Your Credit Limit
A high credit limit automatically improves your credit utilization ratio, which is why reducing your low credit limit can drop your credit score. Due to this reason, you should not reduce your credit limit unless it’s to steer clear of high interest rates.
How to Fix It
When paying off credit cards, you should be careful not to close the one with the highest credit limit. You can also pay your credit card balances in full to maintain them affordably afterward and learn tips to maintain forex cards with ease.
6. Not Having a Good Credit Mix
A good “credit mix” is a combination of revolving credit and installment credit. The former refers to products like credit cards, while the latter means offerings like student loans. If you don’t have a good credit mix, it can impact your credit score.
How to Fix It
Similar to using an investment platform that helps you select a good mix of products, start out with at least one credit card and one type of loan. From there, you can maintain both accounts to have a good credit mix.
7. Applying For Credit When You Don’t Need It
There’s no denying that your credit score affects your auto loan, home loan, and credit card applications. But if you keep applying for new credit products, it does more harm than good and drops your credit score for around a year with each request.
How to Fix It
To steer clear of this problem, don’t apply for credit when you don’t need it. Even when you are shopping around, make sure to go for products that are suitable for you and apply in quick succession. This way, the temporary drop in your credit score wouldn’t affect it too much.
By learning these suggestions, you can follow best practices for improving and maintaining your credit score. This can help you put together a stable foundation for your financial future.
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