We all have a record of our financial life that often goes unnoticed by each of us; and its score will be better or worse depending on the loans we have obtained, our financial performance and the payment history we have built. Based on this information, banks and other financial institutions assess our profile and make decisions on the loans we request to purchase our home or our car; they also take this into account to extend credit limits for consumption.
Obviously we want to have a good credit reputation, and we must avoid some mistakes that will derail this claim.
- Delaying the payment of your bills: This is one of the highest impact factors when assessing your history. Paying late your mortgage, credit cards or car loans (for example) are big mistakes that significantly penalize your personal credit score.
- Skipping payments: Your financial reputation will crumble if you fail to pay off the loans you were granted, credit cards, or even invoices for goods and services (telephone, Internet, electricity, etc.) It goes without saying that it would be catastrophic to your history if you were to file for bankruptcy or suspension of payments, or if you found yourself under a garnishment or foreclosure.
- Overspending with your credit card: Most people believe that if they do not exceed the limit of the credit card or religiously pay the monthly balance (even if it is just the minimum) they already have secured the sky in the financial universe. Is not always that way. Credit risk analysis and policies may vary, but for purposes of your history and reputation, experts say it is best to prevent the card balance from exceeding 30% of your credit limit.
- Not getting into debts: Although it seems like a contradiction, this is one way to damage your credit score. If you have never asked for a loan before how do you tell if you are responsible and trustworthy? It is not the same for a 21 years old person to apply for a loan for the first time than it is for another of 35 or 40 years old. If you’ve avoided during the course of your life to go into debt and have always had an aversion to the banks, then when you apply for a loan you need you will not have great things to show. Remember that the greater the age of your credit score, the better you can prove your financial profile.
- Not using your credit cards: If you are of the people that breaks credit cards just as you receive them, hide them not to use them, or if you just settle for simply using them occasionally to keep them active, then believe me you’re not doing yourself any favor to your financial reputation; that way it will be very difficult for the Bank to increase your credit limit, or worse, chances are you won’t get your card expiration date renewed; therefore, your financial history will not be the brightest, and it may even lose some points.
Avoid ruining your financial history, because it is the only way to show the world that you are trustworthy in money matters. Important: If you have economic problems to make ends meet, do not throw overboard what took you years to build, assume your situation and talk to your creditors; perhaps it may cost you some score points, but eventually you will see your sincerity and responsibility rewarded.