When we go through life, the credit score we have can be the difference of getting approved for our loan, getting into our dream apartments or being forced to settle on a less-than-ideal one, or even being given consideration for certain positions. It's important to know how to fix credit mistakes and avoid them. This article will highlight the 10 most common credit mistakes as well as provide practical tips for how to deal with them.
- Don't Ignore your Credit Score
Ignoring your score can have a negative impact. You can track your progress and identify areas of improvement by regularly checking your credit score.
- Credit Repair Scams: Beware!
These scams often involve high fees with little to no return. Avoid these scams if you work with reputable agencies to repair your credit or improve your credit score.
- 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.
- Too Many Credit Applications at Once
If you apply for many lines of credit at once, it can damage your credit score. Space out your credit applications to avoid this mistake.
- Having too many credit cards
Having too many credit cards can lead to overspending and missed payments. You should limit the number of your credit cards to manageable numbers.
- Refusal to Pay Back Loans
A default on a loan could have a serious impact on your score. If you are having trouble making payments, contact your lender and ask about repayment options.
- Applying for Retail Store Credit Cards
Retail store credit cards are tempting but they come with high fees and interest rates. Do your research before applying for any retail store credit card.
- You Can't Ignore Credit Card Benefits
Credit cards often come with rewards and benefits. You can get the most value from your credit card by taking advantage of these rewards.
- Failure to communicate With Lenders
Failing to communicate with your lenders can lead to missed payments and damaged credit. Reach out to your lenders if you're struggling to make payments.
- Becoming a co-signer with no plan
You can find yourself in a tough financial situation if you are a cosigner with no plan. Be sure to have a backup plan for payments if you are co-signing the loan.
Avoiding these credit mistakes, and improving your credit score can help you improve your financial standing. This will not only help you qualify to receive loans with better interest rates but also improve your financial health.
Frequently Asked Questions
What is the definition of a good credit rating?
A credit score of 700 or more is considered good.
How often can I check my credit rating?
Check your credit report every 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?
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 be doing if I discover an error in my credit 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.