Your credit score is just a metric for your personal finances. It usually takes all of your credit related information from credit cards and loans to debts and bankruptcies and refines it to a single number. Lenders use your credit score to determine your eligibility and interest rates for the business loans.
Unluckily, it is very easy to put a few errors on your credit report by mistake, and some of the errors may have a really negative effect on your financial standing. You need to pay attention to these nine approaches that you can damage your personal credit ratings, so you can stay away from them and set yourself up well for the upcoming time.
- Missing Loan Payments
Whether through poor memory or shortage of funds, many of us have missed a credit card payment in some unspecified time in our lives. Luckily, there are many credit card companies that are eager to ignore some of the errors in case you’re ready to pay the debt at the earliest possible time. If that is your case, you can discuss it with your credit card company about setting up automatic payments so that you will not be late on payment again.
- Getting Loans By Co-Signing
Sometimes it can be difficult to say no when someone from your family and friends circle ask you to co-sign a loan with them. And this loan will remain on your credit report until it is fully paid off. In this case if the main borrower fails to make a payment on this loan goes into default, then your credit score could take a serious hit.
- Spending Large Amount Of Cash
A credit limit is just like that — a limit on the amount of debt you can go into using your credit cards. Maxing out your credit card limit doesn’t just specify that you will have difficulties in paying them back. If you are currently using more than 30% of the full credit available to you, your credit rating is also likely to be debilitated.
- Applying For Business Credit Cards
No doubt, it can be quite a fascinating thing when a sales associate asks you if you want to save some cash on your purchase by applying for the business’ credit card. However, applying for a new credit card can open credit inquiries that will stay for two years and will also decrease your overall credit score by a couple of points all through the first year after the inquiry. The next thing which is very important to consider is that many store credit cards have high interest rates, which indicates that you will have a difficult time paying off your purchases.
- Closing Your Credit Cards
Possibly it wasn’t an excellent idea to get that business credit card; however, you don’t need to close your account right now. By canceling the credit card, you will have less credit accessible to you. This means that when you have any other loans or debt, your debt-to-credit ratio will be higher, which will reduce your scores. For the most part avoid closing the old accounts to your credit report, as closing that account could reduce your credit age.
- Filing For A Bankruptcy
No matter whatever type of bankruptcy, personal or business, it is probably one of the most terrible things that can hit to your credit score. Chapter 7 and Chapter 13 bankruptcies both have the same impact on your credit score, even though the lenders may see one type of bankruptcy in a more favorable way as compared to the other. In case you need to file for a bankruptcy, you need to use it as a base to start improving your finances and credit score rating by way of keeping your debts low and making timely payments.
- Not Checking Your Credit Score
Inaccuracies, fraud, or errors on the credit report are the reasons your credit score might hurt. In order to avoid these problems, you need to monitor your credit score regularly. You can get your credit report from the three major credit reporting bureaus, such as TransUnion, Equifax and Experian at least once a year.
- Depending Only On Personal Credit
When you are just starting out, you would possibly have to depend on your funds and credit cards so that it will get up and running. But, doing so will not help you set up a healthy credit for your business. Furthermore, if your small business is going into debt and you are unable to make payments; then your personal credit will get hurt. Businesses usually use credit more than consumers, and developing your business will be difficult without the access to a strapping business credit history.
Unluckily, there is no quick solution for you to fix your credit score that is less than you would like. Improving your credit score takes time and patience by responsibly paying off your debts when they’re due, keeping an eye on your debt usage, and tracking your scores and reports.