In our daily lives, our credit scores can make a big difference. They may determine whether we are approved for a mortgage or not, if we get our dream home or settle for something less desirable, and if certain jobs will be considered. It's important to know how to fix credit mistakes and avoid them. This article highlights 11 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
Being a Co-Signer Without a Plan
Co-signing without a plan could put you in an uncomfortable financial position. Before co-signing a loan, have a plan in place for how you'll handle payments if the primary borrower defaults.
Not Understanding Your Interest Rates
If you do not understand your rates, you may be charged unexpected fees. To understand your interest rate, read your credit card contract carefully.
Cosigning Loans
If the person you cosigned for defaults on their loan, it can have a negative impact on your credit rating. Cosigning a loan can negatively impact your credit score if the borrower defaults.
Neglecting Credit Card Benefits
Credit cards come with many rewards and benefits. Take advantage of these perks to get the most out of your credit cards.
Do not check your credit report
It's important to review your credit report regularly to ensure there are no errors or fraudulent activity. You can access your credit report for free once a year from each of the three major credit bureaus.
Close Old Credit Card Accounts
Close old credit cards to improve your credit rating. Keep your old accounts open if you want to build up a longer credit history.
Maxing Out Credit Cards
Maxing out your credit cards can have a significant impact on your credit score. Your credit utilization rate should not exceed 30% of your total limit.
Neglecting Your Credit Score
Neglecting your credit score could be harmful. Regularly monitoring your score allows you to track and improve your progress.
Not Using Your Credit Cards
Your credit score can be negatively affected if you do not use your credit card. Use your cards regularly and pay them off in full to build credit.
Don't Pay Attention to Balance Transfers
Balance transfers may be an effective tool to consolidate your debts but they also can have high fees and interest rates. You should pay attention to any terms associated with a balance transfer offer.
What to do if you fall for credit repair scams
Credit repair scams can be tempting, but they often come with high fees and little to no results. Avoid these scams through working with reputable credit agencies or by improving your credit rating on your own.
By avoiding these common credit mistakes and taking steps to improve your credit score, you can put yourself in a better financial position. 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 a good 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.
Is it possible to damage my credit rating by paying off an early loan?
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?
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 I do when I find an incorrect 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.