Credit score plays an important role in your life. For instance, if you are looking for a loan then your credit score will decide what interest rate will be offered to you. If you have high credit score you will get good interest rate whereas if you have low credit score your interest rate will go higher. This credit score is evaluated by lenders to determine your creditworthiness. There are several things that hamper your credit score so you should take care of them to maintain a good credit score. Here are some of the things causing lower credit score.
- Making late payment: Payment history is a major factor which is considered while calculating credit score. Delay in making payment surely puts a negative impact on your credit score. So you should avoid making late payments.
- Having higher credit card balance: Every month you should pay off your credit card balance without failure. If your balance is higher it cause damage to your credit score as it increases risk for lenders, so try never to use more than 25 to 30 percent of your credit limit.
- Defaulting a Loan: No matter it is a home loan or car loan defaulting on any can cause serious damage to your credit score. So try never to default on any loan.
- Filing Bankruptcy: Usually people when are not able to pay off their debts due to lose in business or any other financial crisis usually file bankruptcy. But you should be aware that filing bankruptcy will lower your credit score in a terrible way, so try to go for consumer credit counseling.
- Getting a judgment: When the creditors come to know that you got a judgment they realize that you were not only unable to pay off your bills but also the law was needed to get involved. Thus, judgment will hurt your score as well unpaid judgment will hurt it more severely.
- Getting old credit card closed: Majorly your credit score depends on your credit history so it is not good to close old card as it hampers your credit history. Closing your old credit card gets you an impression of higher credit risk in front of lenders, so avoid closing old cards.
- Having numerous credit cards or loans: If you are having too many loans or credit card it shows that your credit checking has been done several times which usually lowers your score. Also many loans implies you are paying so many debts at a time which puts you at higher risk in front of lenders thus lowering your credit score.
- Getting your home foreclosed: If you are not able to pay off your mortgage payment lenders are forced to foreclose on your home. This late payment will affect your credit score and in future you will have to face difficulties to get any type of loan approved.
These are some of the major points that usually affects you credit score so try to always avoid them. You can get your credit report for free, for our instructions see here.