If you have just started paying attention to your financial situation and minding what you spend, your credit score may seem like a complex, scary thing with rules you don’t fully understand. However, if you get down to the basics, your credit score is much easier to understand than you think. Put simply, this is a calculation of how likely you are to repay your debt based on what you have done in the past when borrowing and repaying the money.
If you ever decide to take out personal loans, you may take time to look at MaxLend reviews and reviews of other lenders to see what is a good fit. Creditors do the same thing. They look at your credit score to determine if they should lend you money or if you are too big of a risk. To ensure your credit score is good (and that it stays that way), you should avoid the credit score killers described below.
Making Late Payments
If you miss a payment on a loan or credit card, it may not seem like that big of a deal. While it’s easy for this to happen, the record of that missed payment will remain on your credit file for around six years. It may also cause your credit score to drop.
For some, missing payments from time to time happen. If this is a situation you find yourself in, you may want to set up an overdraft with your bank, even if it is a small one. While overdrafts do have some downsides, they will also provide a buffer against these missed payment issues and small hits on your credit score.
Defaulting on Your Debt
Defaulting also called not paying off your debt, is bad news for your credit score. Defaulting has one of the biggest impacts on your credit score and basically tells a lender that you are constantly struggling to repay your debt. It also means this is likely to happen again.
Even if you default on a loan, you still have a few options to help fix the damage to your credit score. One is to repay the debt as soon as you can. You can also explain to the lender that may prove that the default was just a one-off situation. If you can’t do these, you can wait it out. As time passes, the default situation will have a reduced impact on your credit score.
Taking Cash from Your Credit Card
If you get a cash advance from your credit card, the withdrawal will reflect your credit file. For most, a cash advance indicates money problems. This is often a red flag for lenders, especially if there are other red flags (like missed payments) on your credit report.
Avoid Damaging Your Credit Score
If you want to ensure your credit score doesn’t take any serious hits, it is important to take the right steps to avoid issues. Avoiding the situations above is the best way to minimize the possibility of your credit score dropping.