Our credit score is often the difference in getting a loan approved or not. It can also be the difference in landing our dream apartment, or having to settle for one that's less desirable. Or even being considered for some jobs. To avoid making these mistakes, you must know what to do. This article highlights 12 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
You don't have a budget
If you don't have a plan, it can lead to excessive spending and late payments. Stick to your budget to avoid making this mistake.
Late Payments
Paying your bills late is a common mistake that can hurt your credit score. Late payments may remain on your report for seven years. You can set up automatic payments and reminders to make sure you pay on time.
Maximizing Credit Card Limits
The impact of maxing out credit cards on your credit rating can be significant. Maintain your credit card utilization rate at less than 30% of total credit.
Avoiding Credit Repair Scams
Credit repair scams might be tempting, however they are often expensive and produce little to nothing. Avoid these scams if you work with reputable agencies to repair your credit or improve your credit score.
The Balance Transfers: Don't Miss Out
Balance transfers, while useful for consolidating your debts can also be expensive and come with high rates of interest. Pay attention to the terms of any balance transfer offers.
Ignoring Credit Card Benefits
Credit cards are often accompanied by rewards and benefits. These perks will help you get the most from your credit cards.
Closing Old Credit Card Accounts
Closing an old credit card account can impact your credit score negatively. Keep old accounts open to increase the length of your credit history.
Failing To Communicate With Lenders
If you don't communicate with your lender, it can lead to missed payment and damaged credit. If you are having trouble making payments, reach out to your lender.
Cosigning Loans
Cosigning a loan for someone else can negatively impact your credit score if they default on the loan. Cosigning a loan can negatively impact your credit score if the borrower defaults.
You can't get too much credit at once
Multiple credit applications in a short period of time may damage your credit rating. To avoid making this mistake, space out your applications for credit.
Don't Use Your Credit Card
Not using your credit cards can impact your credit score negatively. You can build credit by using and paying off your cards regularly.
Don't Build an Emergency Fund
Not having an emergency fund can lead to missed payments and damaged credit. Build an emergency fund to avoid this mistake.
By avoiding these common credit mistakes and taking steps to improve your credit score, you can put yourself in a better financial position. Not only can you get better interest rates and qualify for more loans, but your financial position will also improve.
FAQs
What is the definition of a good credit rating?
700 is generally considered a good score.
How often should I review my credit report and score?
You should check your credit score at least once per 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?
While it takes some time to improve credit scores, there are things you can do right away that will show results. For example, paying off your debts or fixing any errors in your credit report.
What should i do if a mistake is found on my credit report?
If you discover an error on your report, you can dispute it both with the credit bureau who reported the error and with the lender which provided the inaccurate data.