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. Determining how to correct and avoid common credit mistakes is essential. This article highlights 11 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
Not Paying Attention to Balance Transfers
Balance transfers, while useful for consolidating your debts can also be expensive and come with high rates of interest. Be sure to read the fine print of any offers for balance transfers.
You Should Check Your Credit Report
You should review your credit report on a regular basis to make sure there are no mistakes or fraudulent activities. Each of the major credit bureaus will provide you with your free credit report once a calendar year.
Don't ignore the benefits of credit cards
Credit cards usually come with rewards or benefits. Use these benefits to make the most of your credit card.
Closing old credit card accounts
Closing an old credit card account can impact your credit score negatively. Keep older accounts open to improve your credit history.
Don't Build an Emergency Fund
If you don't have an emergency fund, it can lead to missed payment and damage your credit. Create an emergency fund and avoid this mistake.
A co-signer who does not have a plan
If you co-sign a loan without planning, it can lead to a financial crisis. Prepare a payment plan before you co-sign a loan.
Late Payments
Paying your bills late is a common mistake that can hurt your credit score. Payments that are late can remain on your credit reports for up to 7 years. Set up automatic payments to pay on-time.
Too Many Credit Applications at Once
Multiple credit applications in a short period of time may damage your credit rating. You can avoid this error by spacing out the credit applications.
You Should Never Ignore Your Credit Score
Neglecting your credit score could be harmful. Regularly checking your score will help you to identify improvement areas and track your progress.
Not Having a Budget
Not having a budget can lead to overspending and late payments. Stick to your budget to avoid making this mistake.
Applying for Retail Store Credit Cards
Although applying for retail store cards may be tempting, they often have high rates of interest and fees. Do your research before applying for any retail store credit card.
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 will this help you qualify for loans and better interest rates, but it can also improve your overall financial well-being.
The Most Frequently Asked Questions
What is a high credit score?
A credit score of 700 or more is considered good.
How often should I review my credit report and score?
Check your credit report every year.
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?
The process of improving your credit score can take time. However, you can make progress in just a few months by settling debts, and repairing errors on your reports.
What should i do if a mistake is found on my credit report?
If you find a mistake on your credit score, you should contact both the credit bureau indicating the error and lender that provided inaccurate information.