Seven mistakes that can lower your credit score
Credit bureau institutions, which give credit reports on bank customers, are now available in Nigeria.
The reports are based on the credit behaviour or activities of bank customers.
It is therefore important for every bank customer to maintain a good credit history with their banks.
Poor credit history affects your reputation with your bank and it may make it difficult for you to get a loan in the future.
Maintaining good credit score is very important because the Central Bank of Nigeria is working on rules that will make it practically impossible for people with bad credit history to get loans.
If you use your credit responsibly now by paying your bills on time, keeping your debt levels low, and not owning more credit cards than you need, you’ll be able to get approved for that zero per cent financing.
Here are seven common mistakes that can lower your credit score with your bank
Paying bills late
One of the biggest factors in determining your credit score is your past payment history. While one or two late payments on your credit cards, loans, or other important obligations over a long period of time may not significantly damage your credit record, making a habit (or mistake) of it can count against you.
Not paying the minimum amount required
If you don’t pay at least the minimum amount due, your creditors will eventually report your account as past due, which can damage your score. Additionally, paying less than the minimum can result in late fees and additional interest charges which can add up quickly.
Keeping debt levels too high
If you “max out” or already owe a lot of money on your credit cards, or you get multiple loans from banks, potential creditors may question your ability to repay. Creditors also use this information to evaluate loan approval or interest rate charges (higher interest rates are used to compensate for higher risk).
Owning too many credit cards
Nigerian banks now issue credit cards to customers too. While offers to sign up for credit cards may be tempting especially for the working class, having access to all of that credit may be detrimental to your credit score because, even if you don’t use the cards, potential creditors may worry that you won’t be able to repay a new obligation if you decide to use all that credit. Plus, all those “inquiries” into your credit report may indicate to lenders that you are having financial troubles or are on the verge of getting too deeply into debt.
Not alerting creditors if you’ve moved or changed names
If you move between apartments frequently and don’t change your address on bills, you run the risk of not receiving bills on time and suffering late payments as a result. Not notifying creditors of a name change could result in your credit report not accurately reflecting the credit you’ve worked to build.
Not periodically checking your credit report
Many people never look into their credit report until they’ve been denied a loan or credit. Inaccurate or missing information in your credit report could raise your borrowing costs or cause delays when you’re in a rush to make a major purchase, like a car. You need to check with your bank to get or know your credit report.
Not using your full legal name in financial documents
Bank accounts, credit applications, and other documents that become part of your credit history come to be on your report through a variety of ways, many of which do not have many other identifying factors. Using your full legal name helps to make sure that your information ends up on your report.