6 Mistakes Hurting Your Personal Credit (and Your Business)

Credit scores are two words that can bring terror into the hearts of even the most courageous and strong entrepreneurs for a valid reason. A credit score is definitely one of the most important factors for opening and closing financial doors throughout a lifetime. And for many, how it is calculated is shrouded in mystery and misconceptions. When it comes to credit, what you don’t know can hurt you.

And because, as an entrepreneur, your business credit options are determined mostly by your personal credit, what you don’t know can hurt your business, too. So, it is very important to understand where you stand in terms of credit, how to check your credit score and make sure that you are maintaining a good credit score.

If you want your business finances to be stable and smooth, you need to ensure that you maintain your personal credit. If your business is new, your personal credit options will be taken into consideration for business loan purposes. It is essential for you to maintain your personal credit score and eligibility. It is better to avoid any mistakes that could damage your personal credit score in a disruptive manner. Here are the top mistakes that can hurt your personal credit eligibility.

You depend too much on one factor in determining credit. A credit report has various factors that decide the credit score and credit eligibility of an individual.

There is no one particular factor that can decide the credit score, so you should not focus completely on one factor, but on various elements and factors. Factors like punctuality of payments, amount you are in debt, length of your credit history and credit age, how frequently you apply for new credit, and types of credit that you are not using. These factors together sum up the credit report or my credit score that you get. Every factor has a different weight and importance.

High credit balance

Too much of a balance is not a positive sign. When an individual is too much in debt, it is a sign of a debt trap or a burden. One must consider having credit that is repaid before going to the next. The credit utilization ratio should be maintained in order to keep your credit score right. For example, if you have a credit card limit of 1 lakh, and you utilize all 1 lakh rupees, it will harm your credit score hugely. The credit utilization ratio should always be lower than the credit availability.

You keep opening new accounts

Do you keep applying for new credit on the go? If yes, you will definitely not like the fact that opening new credit drops your credit score. It is not a good idea to apply for a new loan, credit card, or any line of credit frequently. Make sure you do not apply for new credit unless you need it. Now, how it affects you will be important for you to understand the basics.

Every time you apply for a new credit line, the hard enquiry made by the loan provider will lower your credit score. It is recommended that you not apply for any new credit unless you need it urgently. Read More: Things you require to open a home-based computer repairing shop.

You closed old credit accounts

Credit accounts are good when they are old and have existed for a long time. If you have a line of credit that has a good track record and has been there for a good number of years, it will help you with a good credit score. It is not a good decision to close off any old or existing credit accounts even when you don’t use them.

Closing existing and old credit accounts will hamper your credit score hugely. You need to keep the account open even when you don’t use it if you are trying hard to improve your credit score. It will be a good decision for the long-term.

You only pay the minimum balance

While the full bill amount looks huge, the minimum bill amount is always very pleasing. However, paying the minimum amount will make your loan expensive and you will lose your credit score. Any overdue or outstanding amount will always drop your score.

You don’t pay bills on time

The most important factor is timely payments that determine the credit score. Payment history accounts for around 35% of the credit score, and it is one of the most important ways to attain a good score in a short period of time. If you automate your payments and keep your account funded, you will never miss out on payment. Borrow what you can repay, and choose the EMI amount that is okay for you to consider every month.

Finishing up

Clear your doubts about how to check your credit score by visiting the Clix Capital website. When you enter all the information and details, you will find an option that says, Check my credit score, and on clicking it, you will get your free credit score within a few seconds.