Credit scores are often a deciding factor in our lives. They can mean the difference between being approved for loans, getting our dream apartment and having to settle for less desirable ones, or even being considered as a candidate for certain jobs. Therefore, it's essential to understand the common credit mistakes to avoid and how to fix them. This article highlights 9 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
- You Should Never Ignore Your Credit Score
Ignoring your score can have a negative impact. Regularly checking your score can help you identify areas for improvement and track your progress.
- Do not use your credit cards
Credit scores can be affected negatively by not using credit cards. Use your cards regularly and pay them off in full to build credit.
- 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.
- Close Old Credit Card Accounts
Close old credit cards to improve your credit rating. Keep your old credit card accounts open in order to extend your credit history.
- The Budget Problem
Not having a budget can lead to overspending and late payments. Avoid this mistake by creating a budget.
- Having Too Many Credit Cards
Having too many credit cards can lead to overspending and missed payments. Your credit card account number should be kept to a minimum.
- Applying for too Much Credit All at Once
Multiple credit applications in a short period of time may damage your credit rating. Avoid this mistake by spreading out your credit application.
- In default on Loans
Your credit score can be severely affected by defaulting on a debt. Talk to your lender if payment is a problem.
- Late Payments
Payment of bills late can harm your credit score. Payments that are late can remain on your credit reports for up to 7 years. Set up automatic payment or reminders so you don't miss payments.
You can improve your financial situation by avoiding common credit mistakes. Not only will this help you qualify for loans and better interest rates, but it can also improve your overall financial well-being.
FAQs
What is considered a good score for credit?
Typically, a credit score of 700 and above is considered good.
How often should you check your credit report?
At least once a calendar year, you should review your credit report.
Can paying off a loan early hurt my credit score?
By reducing your credit usage rate, you can improve your credit score and show lenders that your are responsible with credit.
Can I improve my credit score quickly?
It takes time to improve your credit score, but you can see the results in a few short months by paying off your debts and fixing errors on your 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.