Money & Career

5 things that can ruin your credit rating

©iStockphoto.com/Svetlana Damjanac Image by: ©iStockphoto.com/Svetlana Damjanac Author: Canadian Living

Money & Career

5 things that can ruin your credit rating

Most people don't pay much attention to their credit rating, but they should. If you want to buy a house, own a credit card or get a line of credit, among other things, you need to be able to prove that you pay your bills on time.

A lot of people ruin their credit rating for no good reason. They miss payments or do other, completely preventable things that hurt their credit history.

Here are five things you may be doing to ruin your credit rating. Avoid these financial mistakes and the banks will be begging you to let them give you loan.

1. Missing two mortgage payments

If you've got a good credit history, most financial institutions will let you miss one mortgage payment. (You'll still owe the money, they'll just let you pay it later.) Some may let you skip more. But, be careful. In many cases missing two payments can give your credit history a black mark.

2. Getting too many credit checks

Some people get multiple credit checks in one year. You might apply for a credit card, buy a car and purchase a house all within 12 months. That's a problem: Credit agencies don't like when too many people are looking into your background. It raises red flags and questions, mainly, why are you tapping into so much credit in such a short period of time? Two credit checks in one year is fine; three could have a negative affect on your rating.

3. Not using credit cards

This one may seem counterintuitive, but if you've never owned any credit instruments, then you don't have a credit history. That can present problems when you're trying to buy a house or car. Companies like to see that you have good credit -- if you've never paid a credit card bill in your life, then how can they see that you can handle a loan? Get one card and pay it off every month. That helps you build a credit rating, which will help you buy those big-ticket items, such as a home.
4. Shouldering too much debt

Of course, if you have too many credit cards it can get difficult to pay them off. If you skip a bill, then your credit rating will definitely be affected. But so can having five credit cards all with huge balances.

Sure, you may pay the minimum, but at some point it'll be impossible to borrow money -- you just won't have enough cash to go around.

5. Not paying debt off quickly enough

Credit agencies like to see that you're paying off your debt in a reasonable amount of time. If you have a credit card that's been carrying a $10,000 balance for years, then you could have problems.

It's not an issue if you have a balance and pay it off every month -- that's good for your credit rating -- but carrying balances indefinitely shows you may have a problem paying off a loan.

Even missing one bill payment can have a devastating affect on your credit rating. So make sure to pay your bills on time and avoid these other financial mistakes that can ruin your credit rating.

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5 things that can ruin your credit rating

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