Your credit score is a way to indicate your financial responsibility and it will affect your ability to obtain a credit card, a loan or a mortgage. In certain situations, a poor credit score will affect your chances of getting employed as well.
If you have a low credit score, there are ways to repair it
There are professionals who provide credit repair services that will come up with solutions to improve your credit score. One of the ways that your credit score can decline is when you are consistently late in making payments. Sometimes you may have missed making payments as well. And if your payment history reads like this, it will impact your credit score because payment information is reported to credit bureaus by creditors.
And when a pattern of missed or late payments emerges, then this tells potential lenders that it is a risk to lend money to you. But if you are in this situation, you have to create a budget so that you can meet the deadlines for payments. And to make sure you don’t miss them, you can set up reminders on your phone. There are also ways to automate payments. If you still miss a payment, you can try reaching out to your creditor and negotiate a payment plan.
When you have a credit card, it is important to use this with caution
If you always carry a high balance on your credit cards or you are used to maximising your cards, this will cause your credit score to drop. Generally, it is best to keep credit utilisation at a value lower than 30%. You need to pay the credit card balances regularly so that they don’t accumulate. If you need to have a higher utilisation ratio, you can contact the bank and ask them to increase the credit limit.
Having a long credit history can signal responsibility in your credit use. But if you were to close your old credit accounts, this will have a negative impact on the credit score. So if you are going to close an old account, you have to look for ways to maintain a combination of credit types. And whenever possible, it is best to keep older accounts open.
There will be a hard inquiry
Made on your credit report any time you apply for a loan or new credit card. If you were to have a high number of hard inquiries within a short time, this can lower your credit score. This is because this pattern will suggest that you are financially stretched. So you have to think twice about applying for a new credit line. Think about why you are doing this and the impact it can have on your credit score. And when you decide to apply for credit, you need to make sure that you fulfil the qualifications for approval. If you are having financial difficulties and unable to pay debts, it is best to communicate this with your creditors so that a payment plan can be negotiated preventing this from negatively impacting your credit score.