Taking care of your credit score is crucial. It determines what loans you qualify for and the interest rate you will pay. That’s why you must make sure that your score is as high as possible and that it never drops. And the best way to make sure that your credit score doesn’t drop is to avoid doing those things that will affect it negatively.
Here are the warning signs that will let you know you’re getting close to damaging your credit score:
1. You are only making the minimum payments on your credit card and other revolving accounts.
Only making the minimum payments each month is one of the biggest mistake people make, one that can definitely lead to a credit score decrease. If you do it on purpose, you need to stop immediately. However, if you’re only able to make the minimum payments, you should raise the alarm, because you financial health is not doing so well.
2. You have recently been denied credit.
Lenders look at your financial situation when you go to ask them for a loan. If they reject your application, it means that they feel your finances are either stretched to the limit or beyond.
3. Your credit card balance increases.
Credit card balance is the amount of money someone owes to a credit card. If it increases, it means that you’re not paying what you owe or that you’re only making the minimum payments.
4. You can’t afford to save money
If you are not able to set aside savings on a consistent basis, it’s cause for concern. You need to take a look at your finances and change your spending habits.
5. Your cards are near or over the limit
If your creditors see that you are always near your credit limit, they might think that you’re not financially responsible. This will bring your credit score down. You should make it your goal to keep revolving balances below 50% of your available credit limits.
6. You live paycheck to paycheck
This is one of the clearest signs that you’re in financial struggle.
7. Collectors are calling you
If they’re calling, you’re definitely in trouble.