Credit is one of the most useful things in the world for a lot of people. Whether you want to or not, you’re always going to be in a position where money is an important part of your life. There are always going be things that you need to pay for any you’re never going to be able to escape your financial responsibilities. Fortunately, credit allows a lot of people who would otherwise end up in a fair amount of financial difficulty to stay in a much more secure position. Of course, that’s always going to come with a trade off. Borrowing money or purchasing something on credit might help you out in the moment, but that money is always going to need to be repaid. Not only that but, if you’re not careful, the way you use credit could end up damaging your credit rating. Your credit rating is the thing that determines your eligibility for credit and what kinds of interest rates you’ll have on any money that you borrow. If your credit score is too low then your interest rates could end up being too high to afford or, even worse, you could be denied credit entirely. When this happens, a lot of people end up left in a pretty dangerous financial position. Luckily, it’s not that hard to avoid getting into this situation as long as you know which circumstances to steer clear of. With that in mind, here are some of the most common things that can wreak havoc with your credit rating.
A large percentage of your credit score is made up of your ability to pay off your debts in a regular, timely fashion. If missing payments is something that you begin to do regularly, then that’s going to lead to a pretty significant black mark on your credit score. Not only that but many creditors are willing to increase your interest rates or impose late fees if you make a habit of missing payments too often. Of course, just missing one payment here and there isn’t going to send your credit rating crashing through the floor suddenly, but it’s important that you’re keeping a close eye on your finances so that you don’t get into a position where you consistently can’t make your payments.
Long unemployment periods
Let’s face it, unemployment is never fun, but it’s certainly something everyone has to deal with from time to time. If you find yourself in unemployment for a long time, however, you might end up needing to claim unemployment benefits in order to get but. Of course, there’s nothing wrong with that; those benefits exist for a reason. However, if you’re claiming any kind of assistance or benefits for a long time, then that’s going to start to cause some problems for your credit score. The best thing to do is to minimise the length of time that you spend unemployed. Credit companies are able to see that there’s a reduction in your income and the longer you spend on benefits, the more it seems that you’re not going to be able to handle any level of financial responsibility. Because of this credit companies are less likely offer competitive interest rates and might even decide to deny you any credit at all.
Few things are more of a financial burden than buying a car. Aside from property, it’s probably the most significant financial investment that a lot of people will make. The problem is, far too many people end up buying a car on credit that they can’t really afford. Whether this is because they need a car quickly or they are letting their desire for a particular car get in the way of their better judgement, they end up unable to make the payments on their car. This can lead to their car being repossessed which is one of the most significant knocks that your credit score can take. Luckily it’s the end of the world if this does happen. Sites like https://creditrepaircompanies.com/repossessions/ can help you figure out what to do next if your car has been repossessed. Of course, the best way deal with this is to avoid it entirely. The best way to do this is to make sure that the car you buy isn’t going to put you into the red financially.
Requesting credit too often
Credit companies that see a sudden spike in the number of credit requests that you make are going to see that as a pretty serious red flag. A lot of credit requests at once tends to indicate that your financial position is less than secure, meaning that any credit you take on isn’t going to come with much of a guarantee. Credit companies aren’t interested in taking risks that they don’t need to, so someone who seems to need credit because of a poor financial situation isn’t going to be their first choice. Try to avoid becoming overly reliant on credit as a method of dealing with any financial situation. Careful budgeting, as well as a reduction in living costs or a potential increase in your income, are all alternatives that help you avoid this problem pretty easily.
Closing cards without clearing their balances
It might seem as though getting rid of credit cards is always going to be a good thing for your credit rating. After all, less debt means a better credit score, right? Well, not quite. The credit that you currently have helps companies calculated how much credit they can extend your way and if that level decreases then they will be less inclined to offer you as much credit as before. Not only that but leaving a balance on a card that you close is another way to show credit companies that you’re not able to handle the payments, and that’s going to make them less and less likely to offer you any credit whatsoever.
Remember, even if you get into the position of a low credit rating, all hope is not lost. There are always things that you can do to help get yourself into a better financial position. There are plenty of debt charities around who can help you figure out strategies to pull yourself out of debt and give your credit rating a much-needed boost.