- Emma Anderson
- September 4, 2020
Does your monthly credit report make you wonder why the graph is downward despite all the efforts? The credit score is indeed measured based on your history and prospect of repayment based on your current situation.
You need a good credit score to get a loan in case of an emergency. Even most of the lenders prefer borrowers with a good credit rating. You might be aware of the significant factors determining the credit ratings of a person. Still, some reasons are not known to the majority of the people that can cause negative markers in your report.
In this blog, we have mentioned those unexpected factors or habits and how you can avoid them.
Unused Credit Cards
We know how important it is to pay the credit card bill on time. But what if the cards are not used at all. It creates a negative impact on your credit report. This is because the lender wants to see some activity on your credit history that involves responsible debt management. Even you make a single purchase will not be of much help. You need to make some regular payments and repayments. Moreover, the little use of credit cards doesn’t help you in proving you are a responsible borrower.
A viable solution here is to make the different membership subscriptions through the credit card. You can approach direct lenders for instant doorstep loans or use a card instead. But make sure you repay the cost on time as it may turn out to hit the credit rating.
Ties with Defaulters
Your financial associations have a great deal of impact on your credit report. The moment you take a joint loan with someone, your credit history is linked with them. This can be used by the lenders to review your application for the loan. Spotless credit history might help your case in such situations. But if your credit history has some little hiccups, the record of your partner might affect the application.
You must consider the decision to take a joint loan with someone keeping in mind their financial status. If possible, the best you can do is offer them help by being a guarantor since it reduces your responsibility when compared to joint loans.
The moment you close any of the financial products, your credit rating takes a slight hit. You might want to go through the cancellation since the account or product is not used anymore. But for the lenders, it leaves a negative mark on the report. When you cancel a credit card, you reduce the amount of credit available to you. This increases your credit utilization that negatively impacts the rating. The larger consumption of finances creates a false picture of you as someone with a high dependency on the credit amount.
You can use keep an unused account to prevent the negative impact on the ratings. Also, this can convey the message that you are not tempted easily with unnecessary spending.
Spending Too Much
We have discussed earlier how an unused card can harm the credit score. This doesn’t mean you can go full-shopping mode with the cards in the wallet. Spending too much certainly creates a negative effect on the credit report. It shows how much you are dependent on the credits. Also, the pile of unpaid dues can be overwhelming for your finances. You will end up in a debt trap with never-ending monthly instalment and a knocked-up credit score.
You can put a cap on the credit card spending every month to make sure you use the card in a limit. Options such as instant doorstep loans are a better alternative for small expenditures with a few months of commitment.
Excess Loan Applications
A loan application doesn’t have a considerable impact. The problem occurs when you start applying excessively through different lenders and channels. A full application is mentioned in your credit rating. This makes the lender think of you irresponsible in choosing the source of your finance. These desperate attempts should be avoided at any cost.
You should read the eligibility and make sure you fulfill the criteria before applying. Do not fill too many application forms even though you need money urgently.
In the end, it is on you to manage your finances responsibly to make sure the credit report is clean from any default. With the knowledge of these unknown factors, your credit report is sure to have an improvement. Even though you already have very bad credit, there is still high acceptance payday loan from direct lenders to apply for.