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4 Ways You Can Wind Up With Bad Credit & Not Even Know it!

Imagine you are applying for a loan or a credit card!

You are happy about it and you are confident that your credit score is good. So you don’t have to worry about anything.

But, you get a call from the bank and get the news stating your loan is rejected. That blows your mind and keeps you thinking where did you go wrong? Why did such thing happen, despite you making all the payments on time?

In today’s world, credit score is everything. In some cases, your new employer might pull out your cibil report just to understand your financial capability and the spending patterns; before handing over big projects to you.

Some pay their bills on time to maintain a good score, or to improve credit score, but wind up with bad credit.

So how do people wind up with bad credit and how to fix bad credit?

If you make minimum payments

If there are lines of credit and credit cards running, always try to make the payment in full. Do not make partial payment or minimum payments to avoid tampering your credit score.

Many people tend to spend a lot of money. And, when the time comes to make the payment, they make minimum payments and assume their scores won’t be affected. But unfortunately it does.

If you make minimum payment that means you have skipped making the full payment to the bank on the due date. This will result in high interest rates. At the same time, the bank while sending reports to the cibil authority, will show minimum due paid.

Are you shocked to see how bad your credit score is?

If you open too many loan accounts

Always keep it to minimum. Try spending on debit cards and cash to avoid future crises.

The general rule of opening a loan account is when you decide to buy a house, a car or any electronic appliances like fridge, television set, etc. it is suggested that you keep one loan running at a time.

For example if you are planning to buy an IPhone and you already are using an appliance credit, let the existing appliance credit end and then buy the IPhone. This way you won’t be dealing with multiple lines of credit. And, at the same time, you will not face pressure on paying the dues on time.

Try not to convert your credit card transactions into EMI, as those are also counted as credit lines.

Foreclosing your loan early

If you have an existing loan and you plan to foreclose it early before the deadline, then you are making a mistake. You may assume that if you have foreclosed a loan account way before time, then your credit score will get an astonishing boost.

But that will not be the case. The way cibil score works is the bank sends a monthly report to the cibil authorities on your payment history and defaults if any.

This way the scores increase from time to time i.e. monthly and depends how many credit lines you have. If you foreclose your loan, then the account will be reflected as closed and you won’t see any growth in the cibil score.

If you never check your credit report often

Always check your credit report from time to time, so that you are not a victim of identity theft or errors in your report. This way you can see a dip in your credit score.

Keep a track of your payments and also your credit scores. Make a time table for every quarter or so. If there are any errors, you can report it upfront and get it fixed before its too late.

Keep a sharp eye on your credit scores. Take proper precautions to maintain the same, so that you are well prepared for the future. And, in the time of emergencies you do not run out of options and are ready to take on whatever it is.

Note : This post is sponsored by Credit Sudhaar.

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