In our daily lives, our credit scores can make a big difference. They may determine whether we are approved for a mortgage or not, if we get our dream home or settle for something less desirable, and if certain jobs will be considered. Determining how to correct and avoid common credit mistakes is essential. This article highlights 12 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
Don't ignore the benefits of credit cards
Credit cards come with many rewards and benefits. To get the best out of your card, take advantage of these benefits.
Applying for too Much Credit All at Once
Applying for more than one line of credit in short periods of time will hurt your score. To avoid making this mistake, space out your applications for credit.
In default on Loans
If you default on a credit card, it can severely impact your credit rating. Reach out to your lender to discuss repayment options if you're struggling to make payments.
Ignoring Your Credit Score
Ignoring a credit score is a bad idea. Regularly checking your score will help you to identify improvement areas and track your progress.
What to do if you are a co-signer without a plan
Being a co-signer without a plan can put you in a difficult financial situation. You should have a plan to handle the payments in case the primary borrower fails.
Late Payments
Late payments can damage your credit rating. Late payments will remain on a credit report for a period of up to seven year. Automate payments or set reminders for you to pay on time.
Closing Old Credit Card Accounts
Closing an old credit card account can impact your credit score negatively. Keep your old credit card accounts open in order to extend your credit history.
Falling for Credit Repair Scams
Credit repair scams are tempting, but often they come with high fees for little or no results. Avoid these scams through working with reputable credit agencies or by improving your credit rating on your own.
Maxing out Credit Cards
Maximizing your credit card limit can have a major impact on your rating. Keep your credit utilization rate below 30% of your total credit limit.
Cosigning Loans
Cosigning a loan for someone else can negatively impact your credit score if they default on the loan. Think carefully before cosigning for someone else.
Payday loans: How to Use Them
Using payday loans can be a costly mistake. These loans often come with high-interest rates and fees, which can spiral out of control quickly.
You Should Check Your Credit Report
To ensure there are not any mistakes or fraudulent acts, it is important that you review your report regularly. Each of the major credit bureaus will provide you with your free credit report once a calendar year.
By avoiding these common credit mistakes and taking steps to improve your credit score, you can put yourself in a better financial position. This can help you to get loans at better interest and improve your financial status.
Frequently Asked Questions
What is an excellent credit score?
A good credit score is typically considered to be 700 or above.
How often can I check my credit rating?
It's recommended that you check your credit report at least once a year.
Can repaying a loan earlier hurt my credit?
Paying off your loan early will actually improve your score. This is because it reduces your credit utilization and shows lenders that you are responsible when using credit.
Can I improve my credit score quickly?
You can improve your credit rating over time by taking certain steps, like paying off debt or correcting mistakes on your credit report.
What should I do if I find an error on my credit report?
You can dispute an error you find on your credit file by contacting the credit bureau responsible for the error, as well the lender who supplied the incorrect information.