Most people aren’t aware of how their actions can affect their credit score. To understand better how credit works, think about the way Facebook works. Your credit interactions in the real world work similarly to your virtual interactions on the social media site.
Too Many Credit Requests
One area where many people fall into credit trouble is by making too many credit requests in a short period of time. Doing this hurts your credit because creditors see you as desperate for credit, which suggests that you don’t know how to manage your money appropriately.
Think of applying for credit like requesting a friend on Facebook. Some people go through lists of people in their neighborhood or just click on random people’s profiles to request them as friends. If you’ve ever gotten a friend request from someone who you have no mutual friends with and no common interests, you have probably been annoyed and may have even reported the person to Facebook for making a random request. If Facebook receives a lot of these reports, it suspends the person’s ability to request friends.
Similarly, if you apply for every credit card there is regardless of whether you qualify, credit bureaus find out about it. All those credit requests hurt your credit and make it less likely that you will qualify for credit with the company you are applying to–or with any other company.
Maxing Out Credit Cards
Using all of your available credit can get you into trouble. There are a couple of reasons you shouldn’t max out your credit cards.
● Just like you can’t add any more Facebook friends once you reach the limit, you can’t use any more credit if you max out your cards. That means you won’t have any credit available for emergencies.
● Maxing out your credit tells creditors that you can’t handle your money. Have you ever run across any of those Facebook profiles where the person’s made about three posts and has 500 or more friends? That’s what you look like to creditors if you max out your credit.
Late Payment of Bills
Paying your bills late is the most common culprit if you have credit problems. It makes you look untrustworthy and unreliable, and creditors take it seriously. If your bills are 30 days or more late, your credit score could drop by more than 100 points!
Your bills are promises to pay. When you break that promise, credit bureaus make sure everybody knows about it just like people on Facebook warn all their friends about that one ex-friend who stabbed them in the back and told them a bunch of lies. That bad reputation is hard to shake, so make sure you pay your bills on time.
Credit is only confusing to those who aren’t aware of how it works. Basically, anything you do financially, good or bad, gets reported to the credit bureaus almost as quickly as news gets around Facebook.
So engage in good credit habits and avoid bad ones in order to keep your credit reputation positive and qualify you for new credit when you need it.