More than 30 percent of Americans have a bad credit or credit rating of up to 601.
Have you ever wondered what hinders your credit and reduces your chances of getting a loan? Knowing what hurts your loan can help you improve it and achieve your financial goals. Let’s consider some facts that you surely don’t know.
Read below to discover five factors that you may not know about that may affect your credit rating.
- Not having enough credit
No credit is the same as good credit, isn’t it? The truth is that it is the opposite. No loans at all or few loans mean that nothing can be used to create your credit rating. To get a credit score, you need at least one credit card, or a credit, that has been open for at least six months.
Many people avoid credit cards because they are concerned about debts. But the lack of a credit score will affect your ability to buy a car or a house. Lenders love to see a good payment history before giving you a loan.
- Canceling credit cards no longer used
It may makes sense to cancel old credit cards that do not have a balance. But this step is one of the reasons that have damaged credit scores. By canceling a credit card, you reduce the loan amount and the age of your credit history.
Keep an account open and use a credit card every few months to maintain an active account. Then you can immediately pay off the balance and maintain your credit rating.
- Debt consolidation
Debt consolidation can lower your payments and interest rates. But it can also harm your credit.
This forces another hard request to your account and reduces your account in this way. Consolidating your debt on a single credit card, lowers your credit age. It also increases the debt to credit ratio.
But if you can pay off your debts faster, it can help your credit account over a period of time.
- Too many difficult queries.
Every time you apply for a larger loan, a difficult task appears on your credit report. Every complex research negatively affects your credit rating. These requests affect your credit rating, even if you have not received approval. Not only is it difficult to talk about your grades, it also gives lenders the impression that you are desperate for a loan.
People who have at least six requests are eight times more likely to file for bankruptcy.
- Ignoring your credit report
Ignoring your credit report does not make it go away. In fact, being aware of your credit rating, you can raise it.
When you use a credit checker, you will see a list of all open and closed accounts. This allows you to dispute any incorrect information that could harm your account. Free credit checks can also give you a reason for a low score, and then you can work to improve it.
Once you figure out what hurts your credit rating, it’s time to get you on your way. Start by checking your credit report and challenging any errors. Then work on reducing the utilization rate of the loan. Remember to follow the payments and see how your account changes.