Most people are aware that credit ratings exist. When you apply for a loan, or a credit card, or really any form of finance, the lending organisation checks your credit rating. They do this in order to assess whether you’re a good risk, or a bad risk, for a money lending agreement. Did you know though, that it takes very little to affect your credit rating? Some money mistakes are so minor you wouldn’t think they matter but when it comes to assessing whether you’re a good risk or a bad one, you’ll find all your money mistakes suddenly come under the microscope.
While it may sound counter-intuitive to say that having no debt makes you a bad risk for lending institutions, it is actually the case. Without any credit history at all, you can’t prove you can handle repayments and manage your debt well. This will negatively affect your credit rating. Banks are very risk adverse – if they can’t see evidence you can pay back money, they err on the side of ‘No’.
Keeping Out Of It
Staying out of your own financial information is a pretty big risk. Around 80% of credit reports contain errors. If you don’t check your credit score regularly, you may be unaware of the information it contains. You may be rejected for loans based on false information and the more knock backs you get, the worse your credit rating becomes.
Taking It to the Limit
This one’s probably obvious; making a habit of using your credit cards to the max does not do good things for your credit rating. It’s a red flag to lending institutions that you are not good with managing your money. If you are struggling with debt, remember that you can always use the help of experts such as Debt Rescue. Let them steer you in the right direction.
When it comes to repayments, deadlines are more important than you think. Sure, your credit card company makes more out of late fees and you always pay the money in the end, but did you know that late payments are always recorded on your credit report? Even one day’s delay in making your repayments can knock a few points off your credit score.
Applying for credit you don’t actually take up makes a negative impression on creditors. If you have lists of applications you’ve made for credit products on your financial profile, you will appear as a greater risk to lenders than you really are. Consider any application for credit carefully before you proceed with the paperwork. Also think carefully about those big ticket items like new laptops; any application for finance will require a credit report, and the more credit checks on your record, the less attractive you are to a lender.
What’s the biggest money mistake you’ve ever made? Share your wisdom in the comments box below.
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