Your credit score becomes the most important consideration when you require a significant credit to cater to certain expenses. While there are a few obvious red flags like regularly delayed repayments and bankruptcy that can significantly rupture your credit report, there are many other practices that can have a negative effect on your credit score and to any loan application you may put in.
What follows is a rundown of 5 of the biggest credit score red flags that you should be aware of, in order to avoid an unnecessary decline in your credit score.
Opening Many Credit Accounts In A Short Span Of Time
We often get calls about attractive offers given on a credit card. While these offers sound alluring, having too many credit cards impact your credit score negatively. In fact, most lenders have a cut-off on the number of active credit applications a borrower can have. Hence, your loan can get rejected, even if you have a decent credit score if you have too many active credit accounts or applications.
Maxing Out Your Credit Card Or Paying Only The Minimum Due Amount
Maxing out your credit card is a big no-no when it comes to your credit score. As a matter of fact, it is advisable only to spend close to 30 per cent of your total credit limit and clear your dues before the due date.
Using Your Credit Card For Withdrawing Cash
Withdrawing cash with your credit card is not advisable. Not only does it have an alarming rate of interest, but it also reflects poorly on your credit report by disturbing your credit utilisation ratio. Thus, to maintain a good credit score, it is a good idea to stay away from this practice.
Your Account Has Been Sent To Collections
When an account is severely over-due, it goes to collections. The account appears on your report as a “charge off” signaling that the lender has given up on trying to recover the loan. A record of such a defaulter stays on the credit report for seven years from the date of delinquency.
You’re a Guarantor for a Defaulter
When you co-sign a loan, it partially becomes your responsibility to make sure that the loan is repaid in time. In case of a defaulter, it impacts your credit report as well.
If you’re doing everything right and yet your credit score is falling significantly, the chances are that there is an error in your credit report. It is not uncommon for the authorities to make errors in your credit score. This is why it is absolutely necessary to check your score regularly. Clix Capital has partnered with Experian to provide an accurate credit score for free and help you map out your credit eligibility with ease. To know more, visit: https://www.clix.capital/credit-score/