it is a well-known fact that good credit is of utmost importance. Nevertheless, there can be only a few, who can claim to have a good credit rating. If you are one of them, then take charge as soon as possible. You’ll have to work hard on improving or restoring your credit. This is not easy task and can take time. So, you need to have enough patience and resilience in order to be able to see improvements in your credit. Furthermore, once your credit score improves, you will also be required to maintain it properly. Therefore, you’ll have to avoid making wrong financial decisions. In addition, you’ll also be required to keep in mind some factors which can have an adverse effect on your credit.
Actions that can damage your credit
There are a few actions which you may think are advantageous, but these can have a dire effect on your credit. A few of these are:
- Applying for too many credit lines – You need not apply for too many credit lines, at the same time. Although, you may require a few credit cards and some other types of credit too, it is still important for you to avoid applying far too frequently. This is because, if you apply for too many credit lines, the creditor or the lender will pull (hard pull) your credit report. Hard pulls can have a negative effect on your credit.
- Having a single type of credit – You should avoid having only a single type of credit. This is important, as your credit score is calculated on the basis of various factors. Having different types of credit lines is important. So, if you own only credit cards, it would not help improve your credit. You need to maintain a balance, with regards to the lines of credit you are using.
- Closing down accounts – You’ll have to avoid closing down credit card accounts. When you close down numerous accounts, the credit history for these is lost. Furthermore, the total credit limit gets lowered and the credit usage reaches the specified limit. This has a negative effect on your credit.
- Making high usage of credit cards – You will have to avoid making high usage of credit cards. This is one of the greatest mistakes, which has an adverse effect on your credit. High credit card usage results in high debt amount. Therefore, it becomes impossible to make the payments. High debt amount can result in high APR too. Furthermore, high balance on credit cards always has a negative effect on your credit. So, it is always advisable to carry low balance on your credit cards. Otherwise, it would not be possible for you to see any improvements in your credit rating or your credit score.
The above are some of the actions, which can have a bad effect on your credit. So, you’ll have to keep in mind that it is always better to avoid making the above mistakes. Only then, it would be possible to improve and maintain your credit. If you follow the above points on what to avoid, in addition to getting some help from the credit counseling services, you may never have to face complex credit issues.
Andy Raybuck is a financial writer who has insightful knowledge in dealing with different financial issues. He tries to help people to get out of difficult financial situations by contributing financial write ups to websites and blogs. He is associated with a community which is specialized in helping people to reduce their debt.