Five Sneaky Credit Killers - Bankruptcy Canada
Watch Out For These Sneaky Credit Killers
Are you worried about your credit?
Here are some of the key issues that you need to be aware of that can hurt your rating.
Your credit score is important.
It’s how lenders will determine whether you are reliable and a good choice for them.
If you have a poor credit rating, then you can run into all types of issues.
For instance, you won’t be able to access a line of credit anymore which will limit the purchases that you can make.
This is going to be a serious issue for the typical business owner and the individual managing their finances.
You might think that you are aware of the typical ways that your credit can be damaged.
However, it could shock you to learn that there are subtle issues that impact your credit.
For instance, even checking your credit score could ultimately cause you to run into problems here.
So, let’s take a look at some of the dangerous credit killers you might not be aware of.
It’s so easy to slip up and forget to pay a bill that you owe.
Phone bills are a common one here and you might find that you are constantly paying your phone bill late.
Did you know that this is one of the main reasons why you can run into issues with mortgage financing?
It’s true – many people are rejected for a mortgage simply because they are regularly late paying their phone bill.
As such, you do need to make bills like this on time.
If you don’t do that then it will be reflected in your credit report.
It can leave a nasty black mark that could actually be quite difficult to recover from.
The lesson here is that even small balances can hit you hard.
Are Your Balances Too High?
Alternatively, you might find that you are constantly pushing against your credit limit.
This is a problem as it means that you will look like more of a risk to a lender.
How you utilize your credit does impact the overall rating.
That means that you should be regularly paying the balance off or keeping it relatively low.
Ideally, you want to keep your utilization at around 50% or even below it.
So, if you have a $4000 credit card, you need to be around $2000 in terms of utilization.
Have You Been Co-Signing Debt?
If you are in a strong financial position yourself, you might want to help someone else out.
For instance, you could be supporting a friend or family member by co-signing their debt.
Most people assume that co-signing means that you are responsible for just 50% of the total debt.
The reality is that with this type of agreement if they don’t pay you’ll be responsible for covering all of the debt that they have accumulated.
That does mean that you are tied to their performance.
So if they are late with their payments it hurts your credit score.
Indeed, the report will show that you are in fact delinquent.
That’s why you need to be careful about who you choose to do this for.
It’s important that you can trust them to continue to pay the debt that they owe.
If they don’t it will leave you in a far weaker position in the future.
What About Closing An Account?
You might think that by closing an old credit account, you are making a positive decision with your finances.
You could see it as a way to clean things up and make things easier to understand or manage.
That’s totally understandable but there are issues here.
If you do this, then you will be losing all the credit history connected to that account.
This means that you will no longer have this as evidence of your good standing.
Instead, you might have a new fresh account with no history of lending and this always looks bad to creditors.
It’s a common theory that if you have fewer credit accounts then you’re going to be more attractive to a lender.
That makes sense because you’re taking fewer risks but you’re also providing less information and less context for them to make a decision.
So, because they don’t know how much of a risk you are anymore, you could be rejected anyway.
Even if you do have a completely clean slate.
Should You Apply For More Credit?
This is where things get complicated.
As already mentioned, closing credit accounts down can have a negative impact.
Well, so can opening too many new ones up.
When you open a new one it will appear on any credit check that you approve.
This can look risky if you have opened multiple credit applications in a fairly short period.
It can make it seem like you are desperate and this is always going to make your creditors feel nervous.
So instead of doing this, you should think about instead gaining a copy of your credit report and bringing it with you.
In doing so, the lender you are seeking financing from won’t need to complete their own credit check.
You should have more than enough information for them to provide a quote and that way you don’t need to approve multiple checks from different businesses that could ultimately weaken your score.
You might find that you have made some of these mistakes.
Don’t worry, they are quite common and your credit score is constantly changing.
It’s not going to be the same as it was several years ago.
As well as this, you can scrub off the black marks by improving your credit score over time.
This is simply a case of clearing any of the debt that you have hanging over and building up a history of good borrowing practices.
If you need more support here we can help and will be happy to offer expert advice on the right way to approach improving your credit history or cleaning up debt.
Get in touch now and a professional member of our team will be glad to assist you.