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. Therefore, it's essential to understand the common credit mistakes to avoid and how to fix them. This article will highlight 11 of the most common credit mistakes and provide practical tips on how to address them.
Having Too Many Credit Cards
Too many credit cards may lead to excessive spending and missed payments. Maintain a reasonable number of credit card accounts.
Failure to communicate With Lenders
Communication is key to avoid missed payments or damage to credit. If you are having trouble making payments, reach out to your lender.
Falling for Credit Repair Scams
Credit repair scams are tempting, but often they come with high fees for little or no results. Avoid these scams by working with reputable credit repair agencies or improving your credit score on your own.
You Can't Ignore Credit Card Benefits
Credit cards are often accompanied by rewards and benefits. These perks will help you get the most from your credit cards.
Maxing Out Credit Cards
Credit card maxing can have an impact on your score. Your credit utilization rate should not exceed 30% of your total limit.
Not Having a Budget
Budgeting can help you avoid overspending or late payments. This mistake can be avoided by sticking to a set budget.
What to do if you are a co-signer without a plan
If you co-sign a loan without planning, it can lead to a financial crisis. Have a plan for handling payments in the event that the primary borrower defaults before co-signing.
Do not use your credit cards
Your credit score may be negatively impacted if you don't use your credit cards. To build credit, use your cards frequently and pay them in full.
Payday Loans: Use them to your advantage
Payday loans are a costly mistake. These loans often come with high-interest rates and fees, which can spiral out of control quickly.
Close old credit card accounts
Closing your old credit card can affect your credit score negatively. Keep your old credit card accounts open in order to extend your credit history.
Don't Ignore your Credit Score
Ignoring your score can have a negative impact. Regularly checking your score will help you to identify improvement areas and track your progress.
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?
700 is generally considered a good score.
How often can I check my credit rating?
It's recommended that you check your credit report at least once a year.
Can early repayment of a credit card affect 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?
You can improve your credit rating over time by taking certain steps, like paying off debt or correcting mistakes on your credit report.
What should i do if a mistake is found 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.