An inadequate credit score has become like a nightmare to every second person you meet these days. There can be a plethora of reasons responsible for a low credit score. Whether it is a constant ignorance of credit report, or unawareness of the components of the score, one or the other reason leads you towards the deterioration of the credit score.
Often people pay attention to their low rates only when they are looking for mortgage. However, you need to understand that there is no magic wand that will boost the score in a fraction of a second. You have to handle your debt burden and credit cards in such a way so as to bring stability in the score. You can also hire credit repair agency that can assist you accelerate your score.
Another way in which you can improve your score is by avoiding the following mistakes.
1. “No Credit Means Good Credit”
The foremost thing a lender consider while approving the loan is your payoff capacity. If you have never taken a loan, your report shall not reflect your payoff capacity at all which is quite understandable. Although it doesn’t leave a negative impact on the lenders, it puts them at an indifferent position while approving your loan.
2. Late Payment or No Payment
You very well know the fact that your late payment of bills or installments will drop down your score. Still for one or the other reason you fail to pay off your bills on time and the worse is when you don’t pay your credits at all.
The above scenario arises when there’s an imbalance of income-expenditure cycle. When the payment exceeds income, it results in late payment or no payment affecting the score adversely. Make sure to take the loans in such a way that you can pay its installments easily out of your income.
3. Credit Mix
Your credit score is made up of five components namely payment history, debt burden, length of credit history, type of credit and new credit. When you have too many credit cards or you have taken various loans, there are likely chances that your score will be low as it will increase your credit mix.
To avoid such a situation, you should take credit only when it is necessary. Don’t ever buy credit cards by getting tempted by the promotional offers or various marketing schemes, as there are high chances such practice shall hamper your score.
4. Stop Making Minimum Payments
If you think that regular payment of bills and installments shall rise your score rapidly then you may be wrong. When you do minimum payment of your credit card, it has very less effect on the credit score. For instance, when you have the limit of $1000 and you pay only $100 a month, it will reflect only 10 % of payment of credit limit which is quite minimal to improve scores.
Try to set a specific amount of payment that’s somewhere near to your credit limit. It will not only help you improve your score but will also give sustainability to your score.
5. Don’t Ever Take Cash Advance
It is probably the biggest mistake people do. The rate of interest on advance cash is probably the highest rate compared to all the other credits. Hence, you will be paying back much more than what you have borrowed. Besides, when you take an advance loan, it indicates that you stand in the need of cash and unable to manage your credit out of your income.
Hence, it’s highly recommended to avoid taking cash in advance.
To sum up, we would advise you to cultivate a habit of consciously maintaining the accounts so that you don’t face issues of insufficient credit score. Besides, you are recommended to consult professionals providing credit score repair services to save both your time and energy.
