Are you accidentally damaging your credit score?

Could you be hurting your credit score – and therefore your ability to get future loans – without even realising it? There are some small behaviours that many people don’t know are harmful to their credit rating. Fortunately, once you recognize them, you can fix the behaviour and solve the problem.

Making too many credit applications or enquiries

Many of us understandably think it is smart to shop around for a credit card or transfer balances to get the best deal because that’s how it works with most purchases. However, in this case, each enquiry is logged on your credit report and too many enquiries can make lenders think that you are under financial stress (and in need of a lot of credit). These listings remain on your report for five years too. By all means, shop around for the best rates, but only fill in an application once you are sure you have found your preferred lender.

Using Pay Day lenders or in-store payment options

Services like Nimble and Wallet Wizard can help you out of a tight spot but other credit providers see this a red flag. Similarly, using AfterPay or ZipMoney can also be an indicator that you are not managing your own finances or spending beyond your means. Many lenders will think twice about approving a loan or may increase the interest rate if they see a reliance on these types of services.  You should think twice before using them or when it is your only option.

Getting cash advances on your credit card

It’s tempting to think of a cash advance from your credit card as a quick fix for cash flow problems. However, this is something you should definitely avoid except in case of absolute emergencies. Cash advances are red flags on your credit history that you’re short of funds. Plus, you also typically get charged a high-interest rate on the advance, potentially leading you deeper into debt. Start building up an emergency savings fund today that you can use instead.

Do you have any red flags on your credit report? Click here to get a FREE copy of your credit report.

Only making minimum payments on your credit card

This is another behaviour that’s easy to fall into when money is tight. But, while it keeps you from being charged late or missed payment fees, which is good, it is a warning sign to lenders as it suggests financial stress. Not to mention, only ever making the minimum payment will ensure that you never clear your credit card debt. Always put a little extra on, even if it’s only 5% to 10% more than what’s owing.

Read next: 4 signs you may have bad credit

Making late payments or missing payments

Regularly being late with payments of bills and debts harms your credit score as it tells lenders you’re unable to stay on top of your financial obligations. Defaulting on payments – owing more than $150 for over 60 days – will definitely put a big red flag on your credit report. Prioritise paying bills on time and set up automatic direct debit payments wherever possible. If you can’t pay a bill on time be sure to make arrangements with the creditor before it’s reached 60 days past due.

Failing to check your credit report

Naturally, you’re not checking your credit report if you don’t think you have any problems. However, you may be unaware of issues in your credit history that will prevent you from securing a loan when the time comes. This is why it pays to stay on top of what’s in your credit history. There are ways to remove defaults from your credit report and restore your credit rating if need be.

To find out what’s in your credit history, get a free copy of your credit report.