Top Credit Score Mistakes to Avoid

Managing your credit score is quite important. When you apply for a loan or a credit card, the first thing at which the financier looks at is your credit score. If your credit score isn’t satisfactory, your loan application can be outrightly rejected or you might have to pay a higher rate of interest. Below are some common mistakes that you should avoid to keep your credit score healthy:

1. Making late payments Making late payments of your credit card bills or loan EMIs can severely hamper your credit score. Therefore, you should make these payments on time, always. If you’re the one who tend to forget the due dates and miss payments frequently, you can set a calendar reminder in your smartphone or start an SMS reminder service to ensure that you never miss out on the due dates.
2. Using too much credit It’s not a good practice to use all the credit available to you. Try to use only a small portion of your credit card limit or loan limit. By doing this, you will be able to keep your credit utilisation ratio low which in turn, will improve your credit score. However, this doesn’t mean that you should never use your credit limit above a point, even if it’s necessary.
3. Not using your credit at all While it’s crucial to keep your credit utilisation ratio low, not using your credit at all can do more harm than good. By regularly using a part of your credit line and paying the dues on time, you will build a healthy credit history which will reflect in your credit score. If you don’t have any credit history, your loan application can be turned down because the lender will see you as an inexperienced borrower.
4. Having too many loan accounts There is no point in juggling with too many loans at a same time. If you’re having too many loan accounts, it will reduce your creditworthiness and hence, your credit score will also go down. Therefore, do not apply for a fresh loan until you’ve cleared the previous ones. In fact, it’s better not to apply for a loan unless it’s a necessity so that you can get a loan when it becomes a necessity.

To Conclude Avoiding these mistakes can help you to maintain a healthy credit score and increase your chances of getting a loan at the time of need. Also, it’s advisable that you should check your credit score at least once every month and take appropriate measures to fix it immediately in case you notice a drop in it.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.