Top 5 Financial Mistake - Common Financial Mistake

Mistakes and regrets - an endless vicious cycle that is common to each one of us. I have made innumerable ones, and still make a couple of them every other day. Financial mistakes are quite common and can be deadly. Since you are here reading this article, I am sure that you too have made some mistakes and you're looking for solutions now. We learn from our mistakes, right? Here are a few typical "Oh no!" moments in the finance field from which you can learn some important lessons.

Mistake #1: Not Researching Enough
Money matters can be very complicated and confusing. We often tend to consult a friend or an acquaintance or an expert for advice or suggestion. Unfortunately, this might backfire.

I have a friend who is passionately involved in the share market. When I wanted to invest some money in shares, he was my go-to guy. Taking his advice, I invested my money. A month later, those share prices fell beyond my imagination. That's when I learned a lesson - educate yourself and take responsibility for your own decisions. Nobody else would be as interested in your financial well being than yourself.

Mistake #2: Ignoring Your Gut

Investing is an excellent way to build your wealth and grow your money. Investment advisers are abundant, but they might not be reliable all the time. Amidst a hectic life, consulting an adviser might be very convenient. However, there are moments when you get a hunch that things are not going on the right track. Don't ignore those gut feelings. They have a reason. You wouldn't want to take a wrong financial advice and lose your hard-earned money. Be sure in every way before making a decision.

Mistake #3: Delaying Investments

Life happens. And it happens rather too quickly. You must start investing when you're young. If you don't, you'll surely regret later. Money invested early has a huge potential to grow. Every penny counts. I had started my investments with a meager amount of Rs.100 a month. It's more about developing the habit of saving - the earlier you start, the better you pick it up. You must also have a retirement plan - start thinking of the end and work backward to make it work.

Mistake #4: Ignoring a Commitment

Getting into debt can be easy and scary, and getting out of it is extremely difficult. You must never ignore your financial obligations. It can affect your credit score and lead to severe consequences as well. Missing a payment can significantly impact your credit score. Ending up with a substantial outstanding amount is even more dangerous for your financial health. When you are fresh into the finance market, you might be a little careless or forgetful. Try not to make such mistakes. Repay your balance on time.

What is a Good credit score ? - Credit Score Dropped for no reason

Lenders use your credit score to evaluate whether you will repay your debt responsibly or not. A high credit score would make you a worthy candidate in the eyes of lenders, whereas a low credit score could easily hinder your chances of getting credit. Credit bureaus like Equifax, Experian, and TransUnion assess your entire financial history and use a fact-based mathematical algorithm to calculate your credit score.

A good credit score can open up a lot of possibilities. It can help you to qualify for the best APR when you borrow money, and it can influence lenders to consider you creditworthy. Landlords, teleservice providers, and even cable companies consider your credit score when you apply with them for a product or service. You must know how you can increase your credit score and improve your credit health. Go through our tips to boost your credit score.

Why Did My Credit Score Drop?

There can be a few surprising but very pertinent reasons for a sudden fall in your credit score. Let us dig deep into them.

Old and Inactive Accounts

Have you ever found an interesting promotional offer in a shopping mall or a retail outlet and applied for a credit card? Well, I did at some point in time. And being my ever-forgetful self, I had conveniently forgotten about it.

An inactive account is of no profit to a lender, and a lender can automatically close it without giving you notice. Also, there’s no standard law to decide on how long your account needs to be inactive for before the lender can automatically deactivate it.

The solution to this problem? Well, I have learned my lesson, and so I have set up my internet bill to be auto-deducted every month from another one of my long-forgotten credit cards. You could do the same. Remember to set up auto-pay so that you don’t miss a single payment.

A New Hard Inquiry

My mobile phone connection was pathetic, and I had decided to switch over to a different teleservice provider. A gentleman from the new phone company visited my house to get all the paperwork done. There were a handful of forms to be filled, read, and signed. As I was running late, I had blindly signed wherever the person asked me to. Unknowingly, I had permitted the company to conduct a credit check to ensure that I have the financial capability to afford their services. In short, a hard inquiry was made without my knowledge.

Although you haven’t applied for a loan or a credit card recently, you might have undergone similar minor changes in your lifestyle that resulted in a hard inquiry. You might have inadvertently permitted your internet service provider, cable company, teleservice provider, and even your landlord to conduct a hard inquiry on your credit report. Upgrading your credit card or applying for an increase in credit limit can also result in a hard inquiry.

The solution to this problem? I have become super vigilant. Now I read documents before signing on them; additionally, I always ask a service provider or a lender if the transaction involves a hard inquiry. I keep a close eye on my mymoneykarma account and ensure that all hard inquiries are made with my permission. If you find an unauthorized hard inquiry, it could be fraudulent activity, and you must take action immediately.

Paying off a Loan

This one was my strangest finding. That feeling of satisfaction and relaxation when you finally settle a loan isn’t relaxation in the financial world. You need to have a variety of accounts for maintaining a good credit score. If you pay off a loan, the loan account is closed, and you lose an account. Your credit score drops inevitably.

It is better to have different types of accounts running. Keep a mix of credit accounts and loans if you want to maintain a consistent record of credit score. It indicates that you responsibly manage your finances. Lenders thus consider you to be a creditworthy candidate.

The solution to this problem? Well, it is not a great worry. Paying off a loan might reduce your credit score at the moment, but it also proves that you’re capable of repaying loans and makes it easier to get approval for loans in the future.

Being an Authorized User of a Delinquent Account :

A few years ago, my grandfather had added me as an authorized user(second account holder) of one of his accounts to help me build my credit score. Unfortunately, my old and forgetful grandfather missed a payment. Since I am an authorized user, credit bureaus include that account in my credit report although I never actually use it.

There can be ups and downs of being an authorized user. If the primary account holder pays the bills responsibly, you benefit from the account. If the account holder misses payments, it brings down your credit score as well.

A solution to this problem? You could consider getting yourself removed from the account in case the account holder is a major payment defaulter. However, if the concerned account is your oldest account as per your credit report, removing it can reduce your credit score considerably. Think well before taking a step.

Reasons Why You Should Monitor Your Credit Report - mymoneykarma

Credit bureaus like Equifax, Experian, and TransUnion maintain this record. They evaluate your financial information to calculate your credit score, which is a numerical score that decides your creditworthiness.

Your credit score tells potential lenders how trustworthy you would be with a credit or a loan. Every individual has the facility to check their credit report from time to time. While some do not care about keeping an eye on their credit report, it is important that you develop the habit of monitoring your credit at least once in a year.

Here are a few common errors that you must look out for:

• A new address or phone number that is not yours
• Error in the spelling of your name
• Unknown accounts owned by someone with a name that’s similar to yours
• The same debt or payment failure note listed multiple times
• Incorrect dates
• Mistakenly reported delinquency or late payment
• False record of the current balance
• Incorrectly recorded credit limit
• Closed accounts that are marked as open
• Accounts appearing various times with different creditors listed
• Unauthorized accounts
• Statements in which you are an authorized user, but you are marked as the primary user

To ensure that these errors don't haunt you, try to review your credit report from each credit bureau at least once in a year.

Factors Impacts on your Credit Score - What is my credit score ?

What Determines My Credit Score?

To keep it short and simple, your entire financial history! The number of accounts you have, your credit history, your payment history, the inquiries you make, etc. Everything you do in the financial sphere using your PAN impacts your Credit Score.

Let me tell you something amusing: to build your credit score, you must take credit, you must open a variety of accounts, and you must be active in the money market. A person with no loans or credit cards will end up with no credit score.
How is My Credit Score Measured?

Not using a beam-balance, for sure! I'm just kidding. It is a complicated fact-based mathematical model - an algorithm to be precise - which evaluates your financial history and comes up with the score. You cannot possibly calculate it on your own. Why don't you try mymoneykarma's excellent Intelligence Finance Tool? It not only calculates your credit score but also guides you in managing your finances.
Are you still confused? Put yourself at ease, as we are here to provide you with the necessary  information to help you maintain a good credit score.

Let us now quickly glance through the factors that typically impact your credit score.
 
High-Impact Factors

Credit card utilization: How much should you borrow through your credit cards? Experts recommend that you shouldn't exceed 30% of your available credit limit. A low rate of credit utilization indicates that you spend responsibly. It also suggests that you are more likely to repay the loan on time. Additionally, keeping a substantial buffer on your credit limit also helps you in times of crisis or financial emergencies.

Medium-Impact Factors
Age of credit history: This doesn't refer to your actual age. Rather, it shows how long you have been managing credit. You will be considered more worthy of getting credit if you can prove that you have been maintaining your credits responsibly for a longer period. To sum it up, avoid closing your oldest credit card account, as it might drastically bring down your credit score.

Low-Impact Factors

Total accounts: This doesn't just refer to your savings accounts. It includes the number of credit cards, loans, or mortgages that you have. A variety of accounts is always preferable, as it shows that you have been trusted with credit by other lenders.

Monitor your credit report - Reasons Why You Should Monitor Your Credit Report

Consolidated record of your finances in a detailed document is called credit report.Credit bureaus like Equifax, Experian, and TransUnion maintain this record. They evaluate your financial information to calculate your credit score, which is a numerical score that decides your creditworthiness.
 
Based on your credit score a potential lender can know how trustworthy your to get a credit or loan.you should have a habit of monitor your credit at least once a year.

Reporting Errors :

Credit Report errors are quite common and Your card-issuing company might make mistakes while filing your report with the credit bureaus.

Here are a few common errors that you must look out for:

1. A new address or phone number that is not yours
2. Error in the spelling of your name
3. Unknown accounts owned by someone with a name that’s similar to yours
4. The same debt or payment failure note listed multiple times
5. Incorrect dates
6. Mistakenly reported delinquency or late payment
7. False record of the current balance
8. Incorrectly recorded credit limit
9. Closed accounts that are marked as open
10. Accounts appearing various times with different creditors listed
11. Unauthorized accounts
12. Statements in which you are an authorized user, but you are marked as the primary user.
    
    
     

 

How Do I Deal With Unauthorized Hard Inquiries? - Unauthorized Hard Inquiries

If it is unrecognized one then the hard inquiries will be hard on your credit score.Now, if you wonder how it can be unauthorized one.it will happen for several reasons.

It can be from : authorized lender, it could be a reporting error, or it could even indicate possible identity theft.

Authorized lender : Only with your permission a hard inquiry can be made on your credit report. It cannot make a hard inquiries unless you authorize it.

Even if you haven’t applied for a loan or credit card it will result in a hard inquiry.You probably signed on documents without carefully reading them, hence not realizing that you have authorized the company to perform a hard inquiry.

Reporting Error :If you find a hard inquiry that you didn’t authorize, it could either be a reporting error or fraudulent activity.nce you know the name of the lender under suspicion, you can search online for contact details and approach the concerned lender to check the reason for the hard inquiry.

Identity Theft :If you suspect that your identity has been compromised, approach the card-issuing company, and extensively look for information regarding the account. Look at the account opening date, contact details, amount charged, etc. You must seek help from the company and follow the protocols to deal with fraudulent activity.

Factors Affecting Credit Score — What Is My Credit Score?

Factors That Impact Your Credit Score

• There is a common misconception that your age, salary, and employment history decide how creditworthy you are. That is simply not true.

• These factors play just as much a role as your race, ethnicity, nationality, religion, gender, marital status, area of residence, or assets play in determining your credit score — None!

• The system used to calculate your credit score is efficient, and only assesses your behavior pattern concerning credit.

What Is My Credit Score?

• In layman’s terms, your credit score is a number that tells how worthy you are of getting credit.

• Lenders use your credit score to evaluate whether you will repay your debts responsibly or not. 

• A high credit score would make you a worthy candidate in the eyes of lenders, whereas a low credit score could easily hinder your chances of getting credit.

4 Reasons why your credit score dropped - Why Did My Credit Score Drop?

I have always been particularly keen on keeping an eye on my finances — I have never missed a payment, my accounts are in good shape, and I always keep my credit utilization within 30%.

Why Did My Credit Score Drop?
There can be a few surprising but very pertinent reasons for a sudden fall in your credit score. Let us dig deep into them.

1. Old and Inactive Accounts

Have you ever found an interesting promotional offer in a shopping mall or a  retail outlet and applied for a credit card? Well, I did at some point in time. And being my ever-forgetful self, I had conveniently forgotten about it.

2. A New Hard Inquiry

My mobile phone connection was pathetic, and I had decided to switch over to a different teleservice provider. A gentleman from the new phone company visited my house to get all the paperwork done. There were a handful of forms to be filled, read, and signed. As I was running late, I had blindly signed wherever the person asked me to. Unknowingly, I had permitted the company to conduct a credit check to ensure that I have the financial capability to afford their services. In short, a hard inquiry was made without my knowledge.

3. Paying off a Loan

This one was my strangest finding. That feeling of satisfaction and relaxation when you finally settle a loan isn’t relaxation in the financial world. You need to have a variety of accounts for maintaining a good credit score. If you pay off a loan, the loan account is closed, and you lose an account. Your credit score drops inevitably.

4.Being an Authorized User of a Delinquent Account

A few years ago, my grandfather had added me as an authorized user(second account holder) of one of his accounts to help me build my credit score. Unfortunately, my old and forgetful grandfather missed a payment. Since I am an authorized user, credit bureaus include that account in my credit report although I never actually use it.

4 Reasons to check your credit score - Why you should monitor credit score ?

4 Reasons why you should monitor your credit score :

•     Reporting Errors
•     Identity Theft
•     Financial Infidelity
•     Progress Report

A credit report is a detailed document that contains a consolidated record of your finances. Credit bureaus like Equifax, Experian, and TransUnion maintain this record. They evaluate your financial information to calculate your credit score, which is a numerical score that decides your creditworthiness.

Reasons Why You Should Monitor Your Credit Report :

Reporting Errors :

Credit report errors are quite common. Your card-issuing company might make mistakes while filing your report with the credit bureaus. It is also possible that the credit bureaus make errors while consolidating your overall credit report.

Identity Theft :

Have you heard about credit card fraud, scams, data breaches, and identity thefts? Sounds scary, right? An imposter could steal your personal information, such as Aadhaar and PAN, driver’s license number, date of birth, or other financial information and use it for their own financial gain. These are serious crimes that can not only affect your finances but also ruin your credit history.

Financial Infidelity :

Infidelity indicates a breach of trust. There have been those unfortunate situations wherein a person was betrayed by a trusted or loved one. Don’t be surprised. Incidents like this have become quite frequent, and many people suffer although it is not their fault at all.

Progress Report :

Checking your credit report gives you clarity and aids you in planning your finances well ahead. Your credit report tells you exactly how much you owe to whom and by when you need to settle the amount. If you are in debt, you get to know about the total amount and also track your monthly progress in resolving the debt.

What is good Credit Score ? - 4 tips for good credit score

Fix Your Credit Utilization Ratio

You should keep your credit utilization ratio within 30%. If you notice that your expenses are exceeding 30% of your credit limit, your credit scores will inevitably drop. Consider increasing your credit limit in such a situation.

A higher credit limit automatically brings down your credit utilization rate, provided that your expenditure or credit balance remains constant.

You may call your credit card issuing company and request for an increase in the credit limit or make an application online.

You could also get another credit card for the same purpose. However, increasing your credit limit isn't a piece of cake, and you might have to go through a rough road.

Once you successfully manage to improve your credit limit, spend carefully - your expenses must not increase.

This will balance out your credit utilization rate, and a low utilization rate boosts the credit score.
Don’t Apply for Too Many Credits Simultaneously

Hard inquiries deduct points from your credit score. If you apply for too many lines of credit at a time, each will amount to a hard inquiry.

These hard inquiries remain on your credit report for quite some time. Many hard inquiries at a time will not only reduce your credit score but will also make you seem quite desperate for cash.

Hence, lenders will not be able to trust you. So whenever you apply for credit cards, spread the applications apart over a long period.

How can I stop unauthorised companies to check my credit history?

A hard inquiry can be hard on your credit score, especially if it is an unrecognized one. Now you must be wondering how it could be unrecognized. Well, a hard inquiry could have happened for several reasons. It could have come from an authorized lender, it could be a reporting error, or it could even indicate possible identity theft. Let me tell you about these three issues in detail.

A hard inquiry on your credit report can ideally be made only with your permission. An organization cannot make a hard inquiry unless you authorize it. However, some situations can be confusing.

Even if you haven’t applied for a loan or a credit card recently, you might have undergone minor changes in your lifestyle that resulted in a hard inquiry. You might have inadvertently permitted your internet service provider, cable company, teleservice provider, and even your landlord to conduct a hard inquiry on your credit report. You probably signed on documents without carefully reading them, hence not realizing that you have authorized the company to perform a hard inquiry. Even upgrading your credit card or applying for an increase in credit limit could result in a hard inquiry.

If you find a hard inquiry that you didn't authorize, it could either be a reporting error or fraudulent activity. You can keep an eye on your credit report using mymoneykarma's Intelligent Finance Tool. 

This tool shows you the source of all hard inquiries made on your credit report. Once you know the name of the lender under suspicion, you can search online for contact details and approach the concerned lender to check the reason for the hard inquiry.

What is my Credit Score - Impacts on Credit Score

High-Impact Factors

• Credit card utilization: How much should you borrow through your credit cards? Experts recommend that you shouldn't exceed 30% of your available credit limit. A low rate of credit utilization indicates that you spend responsibly. It also suggests that you are more likely to repay the loan on time. Additionally, keeping a substantial buffer on your credit limit also helps you in times of crisis or financial emergencies.
• Payment history: Pay your bills on time. By doing so, you let lenders know that you are reliable and that you ensure timely repayment of credit. If you miss a payment, your credit score could fall significantly.
• Negative remarks: Your credit reports must be free of any disparaging remarks. This includes accounts in collections, bankruptcies, as well as foreclosures.

Medium-Impact Factors

Age of credit history: This doesn't refer to your actual age. Rather, it shows how long you have been managing credit. You will be considered more worthy of getting credit if you can prove that you have been maintaining your credits responsibly for a longer period. To sum it up, avoid closing your oldest credit card account, as it might drastically bring down your credit score.

Low-Impact Factors

Total accounts: This doesn't just refer to your savings accounts. It includes the number of credit cards, loans, or mortgages that you have. A variety of accounts is always preferable, as it shows that you have been trusted with credit by other lenders.

Hard inquiries: A hard inquiry refers to applying for a new line of credit - be it a loan, a new credit card, a rental apartment, or a mortgage. Too many hard inquiries in a short period present you as desperate for credit. It also indicates that several other lenders have refused you the same.


How is My Credit Score Measured?

Not using a beam-balance, for sure! I'm just kidding. It is a complicated fact-based mathematical model - an algorithm to be precise - which evaluates your financial history and comes up with the score. You cannot possibly calculate it on your own.
Are you still confused? Put yourself at ease, as we are here to provide you with the necessary  information to help you maintain a good credit score.

Why Did My Credit Score Drop? - Being an Authorized User of a Delinquent Account

There can be a few surprising but very pertinent reasons for a sudden fall in your credit score. Let us dig deep into them.

Old and Inactive Accounts :
 
Have you ever found an interesting promotional offer in a shopping mall or a retail outlet and applied for a credit card? Well, I did at some point in time. And being my ever-forgetful self, I had conveniently forgotten about it.

An inactive account is of no profit to a lender, and a lender can automatically close it without giving you notice. Also, there’s no standard law to decide on how long your account needs to be inactive for before the lender can automatically deactivate it.

The solution to this problem? Well, I have learned my lesson, and so I have set up my internet bill to be auto-deducted every month from another one of my long-forgotten credit cards. You could do the same. Remember to set up auto-pay so that you don’t miss a single payment.

Although you haven’t applied for a loan or a credit card recently, you might have undergone similar minor changes in your lifestyle that resulted in a hard inquiry. You might have inadvertently permitted your internet service provider, cable company, teleservice provider, and even your landlord to conduct a hard inquiry on your credit report. Upgrading your credit card or applying for an increase in credit limit can also result in a hard inquiry.

The solution to this problem? I have become super vigilant. Now I read documents before signing on them; additionally, I always ask a service provider or a lender if the transaction involves a hard inquiry. If you find an unauthorized hard inquiry, it could be fraudulent activity, and you must take action immediately.