Things That Kill Your Credit Score

Credit Score plays a key role when you apply for a loan or credit card. It helps banks in assessing your creditworthiness. If you have a high score, you will get an approval easily, but if you dont, then it is very likely that your application will be rejected. There are certain things that pull down your credit score. Some of them are mentioned in next slides:

Missed/Delayed Payments

If you do not have a good payment history, your credit score will be low. Delaying or missing your repayments will reduce your credit score. According to a study, if your average score is 780, then one delayed payment can bring it down by 90 to 110 points. How to deal with this problem? Simple, ensure that you make all the payments by the due date. You can initiate auto debit facility for your account or sign up for alerts.

High Credit Utilisation

Credit utilisation is an important factor in credit score. It is the amount of credit limit you have versus the limit you use. If you use the full limit or exceed the limit, then your score will reduce. Ideally, you should use 10% of your credit limit and your usage should never be more than 30% of the total limit. To avoid using the full credit limit, you should check your credit card statement regularly. Try to pay the total due amount every month or pay as much as you can. If you use most of your credit limit, then try to get the limit increased.

Errors in Credit Report

You may have heard experts advising people to check their credit reports before applying for any loan or credit cards. This is to ensure that the report is error-free. Mistakes in credit reports can reduce the credit score, which is why people should keep checking their reports to identify mistakes. Doing so will also help in finding out theft (if done). If you find a mistake in your report, you should immediately inform your credit bureau about the same.

Apart from the above, there are other things that kill your credit score. To avoid these problems, ensure that you make your payments on time and check your credit report regularly. If you keep a track on your finances and manage it well, then your credit report will be good and your score will increase.

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