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 10 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 credit scores can have negative consequences. Regularly checking your score will help you to identify improvement areas and track your progress.
- Maxing out Credit Cards
Credit card maxing can have an impact on your score. Keep your credit use rate under 30%.
- Late Payments
Late payments can damage your credit rating. 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.
- Close old credit card accounts
Close old credit cards to improve your credit rating. Keep old accounts open to increase the length of your credit history.
- You can't get too much credit at once
Applying for more than one line of credit in short periods of time will hurt your score. This mistake can be avoided by spacing out your credit applications.
- Failing to Communicate with Lenders
Communication is key to avoid missed payments or damage to credit. You should contact your lenders immediately if you find yourself struggling to pay.
- Not Understanding Your Interest Rates
Unexpected fees and charges can occur if you don't understand your interest rate. Read your credit card agreement carefully to understand your rates.
- Failure to repay a loan
Delay in repaying a loan will have a negative impact on your credit report. If you are having trouble making payments, contact your lender and ask about repayment options.
- Retail Store Credit Card Applications
Although applying for retail store cards may be tempting, they often have high rates of interest and fees. Think carefully before applying for these types of credit cards.
- Payday loans: How to Use Them
Using payday loans can be a costly mistake. These loans can have high interest rates or fees.
You can improve your financial situation by avoiding common credit mistakes. This will not only help you qualify to receive loans with better interest rates but also improve your financial health.
FAQs
What is the definition of a good credit rating?
A good credit score is typically considered to be 700 or above.
How often should I review my credit report and score?
At least once a calendar year, you should review your credit report.
Can paying off a loan early hurt my 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?
Improving your credit score takes time, but there are steps you can take to see results within a few months, such as paying off debt and correcting errors on 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.