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#10 Mistakes That Can Hamper Your Credit Score Negative accounts in your credit report refer to the 'settled', but they reflect on the credit bureau report despite being closed accounts

By Ranjit Punja

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"Anyone who has never made a mistake has never tried anything new," this quote is commonplace and is attributed to the great scientist Albert Einstein, but we believe even Einstein wouldn't want a common mistake to affect his credit score.

Yes, the credit score. It seems like just another three-digit number; but in fact, it is the numerical representation of your credit history and this seemingly innocent three-digit number plays an important role when lenders process your loan or credit card application.

Now, you would be careful about maintaining such an important score, right? And not let a small mistake affect your score and ultimately your credit health.

Fear not! Here is a list of ten common mistakes that you shouldn't be making:

Not Checking Your Credit Reports Regularly: It is important that you pull out your credit records and check your credit reports on a regular basis. Checking your credit report can make you a smart spender, by giving your insights on your overall credit behavior.

Not Getting Errors Rectified: It is also important to carefully check your credit report for errors. If there is incorrect information on your report it can negatively impact your score

Not Resolving Negative Accounts: Negative accounts in your credit report refer to the 'settled' or 'written off accounts', although these may seem as closed accounts they will still reflect on the credit bureau report. It is important to not overlook these negative accounts and get them resolved with your past lenders.

Not Updating Your Personal Information: Any change in address, phone number, etc., must be notified to your lender so that it is updated in your credit records. Keep your credit information updated and monitor your credit records periodically.

Delay in Payments: A series of delayed payments could affect your credit score adversely. Avoid making delayed payments at all costs.

Paying Minimum Balance: Paying minimum dues can get you out of a sticky financial situation this month, but repeated payments of minimum balance will show up as debt on your credit report and ultimately affect your credit score.

Higher Percentage of Unsecured Loans: if your credit portfolio consists of more loans that have been secured without any collateral, then this will hamper your credit score.

Over-utilization of Your Credit Card Limits: Your credit score can go for a toss if you are using too much of your available credit. This can get tricky, as it's never too easy to balance your credit utilization at a healthy level.

Maxing out your credit limit can lead to disastrous consequences for your score, even if you are paying your dues on time. On an average, try to use only 50% of your available credit limit.

Applying for Too Much Credit: The perils of asking for an increase in credit-limit debt are well documented. Lenders will get the impression that you are hungry for credit. New, credit card users need to understand that they must handle their credit limit responsibly to keep their credit score at a healthy level.

Co-signing a Loan: Sometimes you must say 'no' to friends. If you must co-sign a loan in most cases for a friend, be sure that the person you are co-signing a loan for will pay his/her dues on time, as defaults in making payments will do serious damage to your credit score.

If you are a co-borrower then you are legally bound to pay it off and this puts your credit health in the line of serious risk.

Which of these mistakes have you been committing? It's never too late to rectify them and it is always better than not acting on them. We are not saying that you shouldn't make mistakes, save them for life's experiences; spare your credit score and maintain your credit health to not get rejected on your loan application. Einstein would agree.

Ranjit Punja

CEO and Co-Founder, CreditMantri

Ranjit Punja is the CEO and Co-Founder of CreditMantri, a Chennai-based technology driven credit management service provider. As a founding member of the team, he holds the responsibility of managing the credit, key relationships and corporate strategies of the company.
Ranjit has been associated with the company ever since its inception and is an entrepreneur with a knack of creating pathbreaking technologies in banking and credit facilities. 
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