The nature of the Credit score system
It is typical for anyone not to be on top of their credit score because it does not start to bother you until you have the need to get something on credit. It is very important to stay actively involved in keeping up with your credit score because there are credit score killers that occur in your life that stunt the growth of your credit credibility.
Your creditworthiness all falls in the hands of your credit score. If you are about to buy a car or a house, your credit history is analyzed in one wholesome figure that determines whether you will get what you seek.
There are many credit scores but the most established one is your FICO sore that is classified between the numbers of 300-850. When you have a score that is above 780, your score is excellent and it gives you vast credit opportunities.
When you have a credit score that ranges from 680 to 720, there is a high chance that you will get approved for certain situations, but not the very highly attainable. Between 720 and 780, they consider it to be okay, although it still might prevent you from being approved in some credit situations.
If you have anything below 680, then it gets harder to be approved for credit and even if you do, the interest rates are so high, sometimes it’s not even worth it.
In order to steer clear away from a bad credit score, there are some credit score killers you should be aware of and these are:-
Making late payments on your bills
This is one of the most common credit score killers out there. People adopt bad financial habits of making late payments on their bills, unaware that each time they do, it is reflected on their credit report. It is approximately 35% of your FICO score.
If you have mortgage payments, car payments or even student loan payments and you are in the habit of paying them late, please note that they report you to the credit bureaus each time you do. This of course, brings down your credit score. Avoid making late payments and be sure to pay the agreed upon payment each month. This way, your credit score will remain good or even rise to a more excellent number.
Owning a credit card that you recklessly use
Having credit cards, in some ways is helpful, but in most cases, people don’t know how to use them wisely. The credit score killers in the society are in plain sight and credit cards are on topmost of the list. Most people view them as a means of overspending and recklessly using them for extravagant purchases. What becomes even worse is when they use them and don’t even pay the minimum to keep their account in good standing. Eventually, the high interests kick in and they end up knee high in debt.
If you have trouble with self discipline and impulse buying, the best option is to close the credit card account. Get a pair of scissors, cut it in half and throw it in the trash. You shall be glad that you did.
Helping someone out by Co-signing for them
It is always thoughtful and nice to help out a relative or friend by co-signing for them when their own credit is bad that they need a co-signer, but it might end up hurting your credit in the long run.
When you co-sign, it means that you assume all financial responsibility for the person you are co-signing for and in the event that they don’t pay or are unable to pay, the lenders end up coming after you. They treat you as though you are the one who took out the loan and you may be taken to court or face a lot of harassment from the debt collector. These kinds of credit score killers don’t end well. You end up at loggerheads with the one you co-signed for and your credit gets ruined as well.
The best thing is to avoid doing anyone any favors because you could be putting your credit score on the line.
Having no credit at all
Credit score killers: It is so ironical; damned if you do, damned if you don’t. When you have no history in activity of credit transactions, your credit score may be affected. The most common quick fix to that is attaining a credit card so that there is ample exhibition of credit history. Having no credit card can be one of the credit score killers in a hurry.
When you have a credit card, it slowly builds your credit score and helps maintain a healthy credit history; that is, if you are making prompt payments effectively.