Common Mistakes to Avoid in Getting a Revolving Loan
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Revolving loans is one of the best proofs that you can manage your expenses in a sustainable manner. And in applying for every type of loan, a good credit history is the first thing that the bank or lender will look at. Thus, having a good credit score is a must in getting a loan approved.
This credit line is a big part of your overall credit score which accounts to a total of 30%. If you habitually max out your revolving accounts, it can drag you credit score all the way down.
Here are the some common mistakes in getting a revolving loan:
Cancellation of old credit account. Cancelling credit account reduces your overall credit score. Many people do this because of the burden caused by the credit’s monthly repayments to avoid future debt problems. However, if this is the longest credit card account that you have and you choose to close it, you just eliminated a huge chunk of credit history. This drags your credit score down.
Choosing to pay specific debts first. If you are in debt, you tend to prioritize which needs to be paid the earliest, but chances are that some debts will be paid late and this hurts your credit history.
Although there is 30 day grace period for late payments, this still impacts your credit score.
Maxing out your credit card. This is a warning sign that impacts your debt-credit ratio. Banks will also ask for your bank statements and they will see this ratio and if it does not look good, this also will have an effect on your credit score.
Avoiding credit cards. Some people think that credit cards are just a simple way of getting yourself in debt, but this is not totally the case. This is one of the tangible evidences how responsible you are in your financial commitments which is a very important part in increasing your credit score. Therefore, it is safe to keep one credit card to have as proof that you have a good credit-debt ratio.
Not double checking your credit report. Most people are just too lazy to calculate and balance the credit statement, but this is essential in keeping an eye on theft or if any information is inaccurate. If you are consistent in this, lenders will see that you are really hands-on in your financial responsibilities and very much engaged in maintaining a good credit history.
Getting a revolving loan can do you good if you are responsible enough in keeping up with its terms and conditions. Having a good credit history will put you on a pedestal where banks are willing to lend you funds for your future aspirations may it be personally or corporately. So do not neglect the common mistakes mentioned above because it may have an impact on your credit score, especially when you are just starting out in the business field.