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7 Common Credit Mistakes and Financial Behaviours to Avoid

Clix July 29, 2021

 

Your credit score is one of the most crucial factors that indicates your financial status. Creditors rely on it heavily while determining your creditworthiness and deciding whether to reject or approve your loan and at what interest rate. You may check your Experian credit score for free here and see where you stand. Ranging from 300 to 900, the closer you are to 900, the better it is for your credit profile. Therefore, it is essential to avoid any credit mistakes and financial behaviours that may harm your credit and make you a high-risk borrower in the eyes of creditors.

Credit management seems to be a lot of work sometimes, but it is essential for your financial health. It plays a massive role in your finances, as it not only leads to approval or rejection of your loan but also determines what interest rate the lender offers you. As far as credit is concerned, you might be making some mistakes unknowingly that might cost you money and harm your credit in the long run. Have a look at some of such errors and behaviours to ensure that you avoid these pitfalls.

1.    Making Late Payments Occasionally

You may think that it is harmless to make a few late payments occasionally. However, since the history of your payments makes a large part of your credit score, missing them even sometimes may be harmful to your overall financial standing. Therefore, pay every credit card bill and loan EMI on time, every time. Setting up automatic bill payments or setting reminders are the best ways to ensure that you always make your payments on time.

2.    Paying Only the Minimum Amount Every Month

If possible, try to pay off your bills and EMIs in full every month. The higher the balance you carry from the past, the more interest you will need to pay, which you could have used to cover other essential expenses or pay off other debts. However, if you are going through a financial crunch and you cannot pay in full, pay the maximum amount possible and catch up at your earliest convenience.

3.    Accepting a Loan Offer Without Comparing

Doing some research and choosing the right lender and loan offer is crucial for getting the best deal. Lower interest rates, reasonable fees and charges, and agreeable loan terms can save you a good amount of money in the long run and protect your credit. The difference of even a few percentage points can make a big difference in your credit score.

4.    Not Checking Your Credit Report Regularly

Your credit report gives a snapshot of your payment history and credit behaviour, including your credit accounts status, history of timely payments, and open credit lines. Check credit score from time to time and if you notice a reduction in it, request a copy of your credit report and find the reason for it. Errors are common occurrences in credit reports that might be holding your credit score down. If you notice any such errors, dispute them with your credit bureau or creditor, have them fixed and see your credit score improve instantly.

5.    Not Keeping Track of Your Credit Score

Many lenders and financial companies allow you to check credit score for free online. For instance, at Clix Capital, you can check your Experian credit score any number of times for free. If you are trying to improve your credit score, check it from time to time and see if your efforts are making any difference or not. By reviewing your credit score regularly, you can quickly identify any issues in your credit report and have them fixed in time. If you do not keep track of your credit score, errors may go unnoticed, which may unnecessarily keep your credit score down for a long time.

6.    Taking Credit Unnecessarily

Taking loans has become extremely easy these days, mainly due to easy application, fast approval, simple eligibility criteria, and minimal documentation requirements of NBFCs. However, that does not mean you should take a loan for every expense you need to make. It would help if you kept your debt-to-income ratio low to maintain a high credit score. Taking too many loans not only reduces your credit score due to several hard inquiries but also poses you as a high-risk borrower.

A straightforward solution is to apply for a loan only when you need funds. By doing this, you will avoid paying unnecessary interest charges and stretching your finances too thin.

7.    Closing Old Accounts

When you close an old account with good standing, it can stay on your credit report for several years. Even if you are no longer using it, closing it down may bring your credit score down. You lose not only the credit limit available with it but also increase your credit utilisation rate.

So, these are a few credit mistakes and financial behaviours you must avoid in all circumstances. You are wondering how to check credit score? Clix Capital allows you to

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