This article will help you to know what things will damage your credit card. Many people don’t know about the mistakes that they do while using a credit card. There are lots of small mistakes we do while using a credit card that directly affects your business credit score.
1) Making late Payments:
Most business people does this mistake. When you do late payments your credit score drop by some points. You have to make your payments always on time. Make sure that all outstanding payments are settled before the due date, it will help you not to decrease the credit score. So, implement the habit of settling bills and payments on time. Some banks provide an auto-debit feature on your bank account. Another way to remind you to pay your bills on time is to set a Reminder on your cell phone.
2) Taking guarantee for other’s loan:
This will affect a lot on your business if the other person fails to pay the loan before the due date. If the borrower is your friend, family member, or any Employee and if they don’t repay the loan on time then this will impact the credit score of the borrower and guarantor also. And in this case, your business credit ratings will be lower.
To avoid such types of mistakes check the history of another person before taking a guarantee of that person. While selecting the person check his/her ability to repay the loan on time. If you avoid this mistake then your business will be successful.
3) Closing old credit cards:
This is the most common mistake that everyone do. Because of closing old credit cards, your credit score becomes lower. This happens when you close an old credit card, it erases your credit history from your financial report. Suppose, when you had used your credit card for five years and then you close your credit card, it erases your all five years data of credit report.
While counting your credit score, the length of your credit history matters the most. When you close the card, it automatically erases the years of credit history which leads to dropping your credit score.
For avoiding this type of mistake keep your old credit card active this will help you to increase the credit score that you currently have.
4) Not Checking your Credit Score and Credit Report Periodically:
As a responsible person, you may have to check your credit score and credit report regularly. Checking your credit score every two or six months is a good habit. This helps you spot errors in your credit report. If you do not check your credit report, it gets very difficult to rectify the mistakes on your credit report. If any error is detected in your credit report, you can tell it to the relevant credit agency to get it rectified.
Many platforms offer free business credit health checks, you can use them to check the score and ratings of your business periodically.
5) Utilising the entire limit on your business credit cards:
If your business is small, then don’t use your whole credit card limit available on your business credit card. When you use your entire credit limit then it raises your credit utilization ratio, which leads to a drop-down in your credit score easily. Some people think that the whole credit limit doesn’t impact the credit score if they settle the bills on time, But that is false. When credit agencies notice a high utilization ratio on your credit card, they think that you’re in financial trouble which is not good for your credit score.
To avoid this type of mistake keeps your credit utilization ratio low. It must be up to 30%. Another way to avoid this is to get a debit card for your business to handle day-to-day expenses, it helps a lot to keep your utilization ratio low.
6) Being scared of Credit:
This is the most common mistake done by many business owners, entrepreneurs, and people who start a new business. If you don’t use your credit card, your credit score will get lower.
You have to use your credit card responsibly it helps you to build a good credit score. Settle the outstanding bills, business term loans, repaying EMIs, and using a business credit card on time, you can show you’re using credit responsibly. This helps to boost your credit score efficiently.
7)Opening Multiple Credit Cards for your Business :
It is bad to have multiple credit cards for your business from the point of view of credit score. When you open multiple credit cards in very low time, it indicates that you’re hungry for credit. This leads to a drop in your credit score.
To avoid this mistake they recommend that you can use one or two credit cards for your business. Check the reviews and features of a new credit card before applying for it and then decide that it is the right choice for your business or not. Don’t open the card just to get a bonus and other short rem rewards.
8) Ignoring the signs of your credit problems:
You have to check your credit report every month or 15 days. This helps you to prevent harm to the company. If you don’t check your credit report on time it gets very difficult to fix the errors.
That errors can damage your credit score and credit report also. If any error is detected you should take quick action. For example, missing some payments, being allowed to make minimum payments.
9) Failing to utilize your credit:
If you fail to use your business credit it directly affects your credit score. Every person who uses credit needs good credit history to boost their credit score. You have to use your credit at least once a month and then be reported to business credit reporting agencies.
To avoid this you have to pay bills on time, at least one time in the month. This will help you to increase your credit score
10)Sharing your credit card Number:
This mistake can be very mortal because it can steal your identical information.
There can be thieves who can do unauthorized transactions without getting to know you which harms your credit score. If this happens to you, you should contact your credit card issuer.
11)Using credit cards too much for rewards:
If you use credit cards too much for non-intended purposes, it increases your utilization ratio and as we have seen before if the utilization ratio increases your credit score will decrease easily.
Don’t use your credit card for getting reward points unless you are sure that you will settle the balances at the end of the month.
12) Opening new credit accounts every time:
This is a very big mistake that you are making a new credit account every time. If you do the same you will be a victim of a credit card company. When you open a new credit account in a very short time your credit score gets lower slightly.
To avoid this mistake use only one credit account and use only a credit card with good offers.
13) Spending too long to shop for the best rate:
Spending too long shopping for the best rate can hamper your business and also harm your credit score. Shop mortgages, business loans for your business in a short period of time. Take less time to shop for the best rate.
14)Raiding retirement funds to pay the debt:
Most victims don’t want to file for bankruptcy. Almost half of the Americans say they will never file a report no matter what ow much credit card debt they had. According to Roderick H. Martin of Marietta, Georgia, says some of his clients have tapped – or even emptied – retirement savings in a desperate attempt to stay afloat. That often just delays the inevitable
15)Ignoring the details:
Before applying for a credit card you should check the credit card’s interest rates or when 0% interest ends can cost you. When you check interest rates it helps you to select a card to use. When you are paying for a new transmission, you need to carry that balance for that instance. Know your teaser rate due date, it helps you to know that you have paid your balance. It is important to read all the information about credit cards before applying for them.
We can conclude from this post that we should avoid such type of silly mistakes while using a credit card. A little bit of mistake will damage your credit score.
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