3 Credit Mistakes You Need To Stop Making Now
Your credit score is an important element of your financial life. A credit score is a number that indicates how likely an individual is to repay his debt. Having a good credit score plays a huge part in helping you to achieve many important milestones in your life such as owning your dream home or car.
Many would know that failing to make payment on time or defaulting on a debt affects your credit score. However, there are many other factors which you might not know that can hurt your credit. Here are 3 mistakes to avoid so you can be assured of a good credit!
Not using credit at all
Not using credit cards at all may seem to be a good way to prevent yourselves from falling into debt. By doing so, you would probably be thinking that you will have scored that perfect credit score too. However, I am afraid to say, nope, it does not work that way. There needs to be sufficient credit activity in your credit file in order to have a credit score. If there is insufficient credit activity, you would not be able to have a credit score and would see a non-scored risk grade of CX in your credit file instead.
Keep your credit active. Swipe your card, but in moderation. Over time, the good payment records will propel you a good credit score.
Closing down old credit accounts
With the many new and attractive credit card offerings these days, you may use less and less of your old cards and be tempted to close them off. However, these old credit accounts could be helping your credit score. They provide information on how long you have been using credit, and how often you paid your bills on time.
By closing off your old credit accounts, it could affect the age of your credit history and result in an immature credit history. Having an immature credit history generally indicates credit risk uncertainty to the lenders and may eventually affect your credit score.
Keep at least one or two old credit accounts open and active, and maintain good payment history with them. Establishing a healthy age of credit history will benefit you when lenders assess your credit risk.
Making minimum payment only
Many may think that so long as they make the minimum payment amount indicated in their credit card statements on time, it will still be deemed as a good payment record and would not affect their credit files. However, this is not the case.
On top of the high interest charges incurred by the rollover balance, the payment pattern of whether a full payment has been made for your credit card bill monthly is reflected in your credit report too. Payment history is a key factor in determining your creditworthiness, hence strive to make the payment not only on time but also in full.
Swipe in moderation and spend within your means so that you can pay off your credit card bill in full. Remember the longer you rollover your credit card balance, the longer the interest accrues and the higher your outstanding balance will snowball too.
Building a good credit is not hard to do at all. Don’t let bad credit keep you from reaching the many milestones in your life.
Check out your credit score today by obtaining a copy of your credit report from Credit Bureau Singapore (CBS) at $6.42 per copy.