Things that Inadvertently Harm Your Credit
A good credit score can open a lot of doors for you financially. If you understand this, then you are on the right track to owning your first car or a residential Cavite house and lot.
However, building your credit successfully is not as straightforward as you might think. You can manage your finances responsibly and still have a low credit score.
To avoid harming your credit standing accidentally, do not do any of the following practices:
You Use Your Debit Card Primarily
Using a debit card seems responsible since it is linked to your actual savings, but non-credit financial data is currently not used when generating credit scores in the Philippines. In other words, paying with your debit card does not do anything to help improve your creditworthiness.
Debit card purchases have no bearing on your credit history. Lenders will only care about transactions involving credit cards, for these are the ones generally reported.
You Are Maxing Out Your Credit Cards
Not falling into arrears on your credit card payments does not suffice to lift your credit score. You also need to watch how much credit you use because your debt-to-credit ratio matters a lot.
Ideally, your maximum balance should be 30% of your total credit limit. If you pull this off, lenders will think that you are not dependent on debt to get by, which makes you a more attractive borrower.
You Avoid Taking Out Any Loan at All
Yes, personal loans come with interest whether or not you pay them on time and in full. However, diversifying your credit usage adds some “pogi” and “ganda” points to your credit score. If you can handle unsecured loans properly, it will tell lenders that you are probably capable of managing secured ones, such as an auto loan and a mortgage, as well.
You Pay Your Utility Bills Late
The credit data of Filipinos is indeed somewhat fragmented, but credit bureaus also use payment histories of utility subscriptions. Examples of these are your Meralco, Maynilad, and Globe bills. The lesson is not to focus on credit card and loans exclusively. Pay every bill you have on time, and your responsible financial habits will pay off eventually.
You Let Delinquent Credit Accounts Remain Unpaid
Lenders hate it when borrowers pay bills late, but they are not unforgiving. Financial institutions are willing to let some of your missed payments slide as long as you take care of them ASAP. The longer you wait to repay what you owe, the more harmful it becomes to your credit.
You Do Not Check Your Credit Reports
Even if you do not intend to apply for a credit card or a loan shortly, it pays to review your credit reports. This way, you can correct any errors. Keeping your file clean help ensure that your credit score remains as accurate as possible. Building your credit requires strategy. It takes work at first, but good practices turn to constructive habits over time, making it easier to attain and maintain a high credit score.