5 Unexpected Things That Affect Your Credit Score
Unexpected Issues that affect you Credit Score - Improving and Maintaining Credit Rating
Many of us are under the impression that if we pay off credit bills on time each month then it means we must be accumulating a very good credit score. However, this is not always the case. Maintaining a credit score and ‘Improving Credit Scoring’ can be two quite separate tasks and this is the topic of our discussion today.
In our struggle/pursuit of a good credit rating, we have to take in to account that ‘Maintaining’ and ‘Improving’ of Credit Score is two different tasks. For instance, paying your credit card bills on time and avoiding any charges can be attributed to ‘Maintenance’ and
spending more money on credit cards can actually make you a more attractive client to the credit card companies, hence, attributed to ‘Improving’ aspect of the credit scoring.
Some of the common issues that are easily overlooked by the most savvy credit card users are discussed below.
Improving and Maintaining a Good Credit Score
Personal Loans, Car Finance and Credit Scoring – (Improving aspect)
Many people prefer to use credit cards for quick payment for that car or 3D TV for which a loan would otherwise be needed. This might actually cause your credit score to suffer. Credit scoring methods favour clients who have a portfolio of credit spread out in different areas such as personal loans, car finance etc. It is simply all about business and maximising profits. A client is seen as being most profitable when they are likely to pay lots of interest payments and as a result making more money for the lender.
However, this is in no way advised here that everyone should apply for as many loans as possible hoping to improve credit scoring. If it is affordable and if you do decide to take a loan out for home improvement, to buy a car or new furniture, you can always count on the fact that it may just actually enhance your credit scoring.
However, this is in no way advised here that everyone should apply for as many loans as possible hoping to improve credit scoring. If it is affordable and if you do decide to take a loan out for home improvement, to buy a car or new furniture, you can always count on the fact that it may just actually enhance your credit scoring.
Everyday shopping using cash only – (Both Maintaining and Improving aspect)
It is widely recognised consumer behaviour to use cash wherever possible in order to avoid credit card bills piling up. This is many cases may be just the right thing to do. However, for all the well organised credit card users out there, you may just be missing out on opportunities that may significantly improve your credit scoring. Paying for something in cash is a transaction which is lost somewhere out there in space, not recognised, acknowledged and accounted for. Whilst at the same time, this transaction opportunity could have been smartly utilised to boost your credit rating by showing your lenders that you are one of those people who actually spend money and can make a prospective client.
It is also to be noted that if you do not use your credit card and if it sits idle for a few months, then it might even have a negative effect on your credit rating. Some credit card companies may simply cancel your account and you certainly want to avoid that! However, as mentioned earlier, if you are one of those well organised people who will not get tempted to leave the balance outstanding for months, it may just be the perfect way for you to maintain as well as improve your credit score.
Paying off Credit Card Balances and Closing an Account – (Maintaining aspect)
Who does not enjoy the feeling of great relief that you get after being able to pay off all the outstanding balances on a credit card and closing the account for good. Whilst paying off outstanding debts can prove to be beneficial but closing an account and breaking all ties with a lender may not be such a great idea. Your credit scoring is made up of many facts about your spending habit and one of the key things is your length of credit record. The longer you hold an account with a lender and maintain a good scoring is better for your scoring in the longer run. You get extra credits for just being with a credit card company for a longer period as a loyal client. Your loyalty pays off as well as your spending habit.
Therefore, combining the point 2 above regarding spending small amounts here and there on a credit card and holding on to it may have a much better impact on your credit score rather than closing an account.
Small debts piling up – (Maintaining aspect)
As much as we would like to think that those small bills such as a small instalment of that TV License fee or that parking fine you disputed and never followed up will not impact our credit rating, sometimes, a small amount can have a huge impact as if it was a thousand.
Debts regardless of being small or large often get purchased by debt collection agencies, which pay a fraction of the amount to the original lender and start pursuing to recover the whole amount from the consumer. Debt collection agencies may sometimes report you to credit reference agencies simply to take revenge or probably something they enjoy doing (!) but there is no doubt they do. Furthermore, any government payments such as parking tickets or speeding fines are more often reported to the credit reference agencies. So start digging in to all the past fines, penalties and bills however small they may be and take care of them before they cause bigger a stir in your credit rating although they may not be larger than the restaurant bill you paid last week.
Credit Scoring and Computer Hacking – (Maintaining aspect)
You may be surprised to relate how practicing safe browsing may affect your credit scoring. There is no doubt that thousands of credit card details are stolen every day over the vast ocean of internet what is we call. Once your credit card details get stolen and if someone spends a large amount on it mischievously, most of the times, depending on the circumstances and your lender, you may be able to wipe it off your statements. But it certainly does not end there.
Next time when you go and ask for a new bank account or a phone contract, you will be surprised to see how bad of an impact it has had on your credit rating. There has been countless number of instances where people with great credit score have received significant damage to their credit profile from only one such hacking event. Therefore, always try and avoid using public computers such as internet cafes to make credit card payments. Also, having good antivirus and anti spam software installed on your computer, not downloading dodgy looking software and avoid visiting untrustworthy websites may greatly enhance your ability to ensure you maintain a great credit score.
To Summarise,
Maintaining a good credit score is a never ending battle which you cannot afford to lose. You also need to differentiate your tactics between improving your credit score and maintaining it. Both the aspects discussed above, if followed effectively with modest care, may result in significant improvement in your credit worthiness.
If you have any questions or experiences you would like to share, don’t forget to get in touch!
