It’s one of those nagging tasks that plagues us in the back of our minds, but never really worries us until we have to see our bank. Well today, AFY is here to take the mystery out of what will and won’t affect your credit score. Read on to find out the truth and put your mind at ease.
Firstly, What Is a Credit Score?
A credit score is a number lenders, such as a bank or credit company, assign to you to determine your ability to pay back debt or credit. The number, however, constantly changes depending upon your credit file. So, what will damage your score at the local bank?
If you have lots of overdue bills and loans e.g. late phone or electricity bills, this can negatively affect your score. However, don’t fret just yet. A provider cannot list your debt as overdue unless you are more that 60 days late in payment and the amount is over $150. So, make sure you always give yourself enough time to pay. Better yet, don’t let your bills become overdue in the first place if you can help it.
Shopping for Credit
When you apply for credit, be it a loan, mortgage or utilities application, if the credit lender gets a copy of your credit file they will note that an enquiry was made. If you have an excessive number of ‘enquiries’ lenders will view this unfavourably and may lower your credit score. So, if you’re shopping around for credit, make sure you remain anonymous – read brochures; don’t ask for free ‘quotes’ that involve getting your credit record out. If you’re using a financial broker, set clear ground rules with them regarding access to your credit file.
Repay Your Monthly Minimum
With a credit card comes credit, a minimum balance that you should repay each month (usually) to avoid a lowered credit score. Although one missed payment likely won’t hurt you, several can damage your score. Worse still, some banks will raise the interest on your credit card to deter you from late repayments, so make sure you have notifications set at the end of each month.
There you have it! The most common pitfalls that come from owning a credit card. But don’t worry too much. Now you’re equipped to go out and make better decisions with your card. If you would like any further advice on how to manage your credit card, please don’t hesitate to get in touch with AFY. We have services to help you with credit, payable and receivables, and cash flow management. We can even help you with regular online bill payments.