As we navigate through life, our credit score can often be the difference between getting approved for a loan or not, landing our dream apartment or settling for a less desirable one, and even being considered for certain jobs. To avoid making these mistakes, you must know what to do. This article highlights 9 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
- The Problem of a Co-Signer Without a Plan
Being a co-signer without a plan can put you in a difficult financial situation. Prepare a payment plan before you co-sign a loan.
- Failure to communicate with lenders
Failure to communicate with lenders can result in missed payments and damage to your credit. Reach out to your lenders if you're struggling to make payments.
- Too Many Credit Applications at Once
Applying for multiple lines of credit in a short amount of time can hurt your credit score. To avoid making this mistake, space out your applications for credit.
- Don't check your credit report
Regularly reviewing your credit report is important to ensure that there aren't any errors or fraudulent activity. The three major credit bureaus offer free access to your credit reports once a yearly.
- In default on Loans
If you default on a credit card, it can severely impact your credit rating. If you are having trouble making payments, contact your lender and ask about repayment options.
- Not Building an Emergency Fund
Missed payments and credit damage can result from not having an emergency reserve. To avoid making this mistake, create an emergency fund.
- Credit Repair Scams: Beware!
Credit repair scams may be tempting but they usually come with high costs and little to no result. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
- Maximizing Credit Card Limits
Your credit score can be affected by maxing out your cards. Maintain your credit card utilization rate at less than 30% of total credit.
- Applying for Retail Store Credit Cards
It can be tempting to apply for a retail store credit card, but the cards usually come with high interest rates. Think carefully before applying for these types of credit cards.
Avoiding these credit mistakes, and improving your credit score can help you improve your financial standing. 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 an excellent credit score?
A credit score of 700 or more is considered good.
How often do I need to check my credit score?
Check your credit report every year.
Paying off a loan before the due date can hurt your credit score.
Paying back a loan earlier can actually increase your credit score. This happens by reducing credit utilization rates and showing lenders you are responsible.
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 be done if there is an error on my report?
If you find an error on your credit report, you should dispute it with the credit bureau reporting the error and the lender that provided the inaccurate information.