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. Determining how to correct and avoid common credit mistakes is essential. This article highlights 12 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
Failing To Communicate With Lenders
Missed payments and damaged credits can be the result of failing to communicate. You should contact your lenders immediately if you find yourself struggling to pay.
Foreclosure on Loans
Delay in repaying a loan will have a negative impact on your credit report. Talk to your lender if payment is a problem.
Having Too Many Credit Cards
Having too many credit cards can lead to overspending and missed payments. Keep your credit card accounts to a manageable number.
Late Payments
Paying your bills late is a common mistake that can hurt your credit score. Payments that are late can remain on your credit reports for up to 7 years. Set up automatic payment or reminders so you don't miss payments.
Retail Store Credit Card Applications
These cards come with high interest rates and fees. Consider carefully whether you want to apply for this type of credit card.
Why You Should Never Check Your Credit Report
To ensure there are not any mistakes or fraudulent acts, it is important that you review your report regularly. You can obtain your credit history for free from each major credit bureau once per year.
You Should Not Use Your Credit Cards
Your credit score can be negatively affected if you do not use your credit card. Credit is built by paying off your credit cards in full and using them regularly.
What to do if you fall for credit repair scams
Credit repair scams might be tempting, however they are often expensive and produce little to nothing. Avoid scams and improve your credit by yourself or working with reputable companies.
Ignoring Credit Card Benefits
Credit cards are often accompanied by rewards and benefits. You can get the most value from your credit card by taking advantage of these rewards.
Don't Ignore your Credit Score
Ignoring your credit score can be detrimental. Checking your credit score regularly can help you track your progress, identify areas where your score needs improvement, and identify any improvements.
Not Understanding Your Interest Rates
Not understanding your interest rates can lead to unexpected fees and charges. Read your credit card agreement carefully to understand your rates.
What to do if you are a co-signer without a plan
A co-signer who does not have a plan in place can land you in a bad financial situation. Have a plan for handling payments in the event that the primary borrower defaults before co-signing.
Avoiding these common mistakes in credit and taking the necessary steps to improve credit can help you achieve a better financial status. This will not only help you qualify to receive loans with better interest rates but also improve your financial health.
Frequently Asked Question
What is the definition of a good credit rating?
700 is generally considered a good score.
How often should you check your credit report?
At least once a calendar year, you should review your credit report.
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?
It takes time to improve your credit score, but you can see the results in a few short months by paying off your debts and fixing errors on your report.
What should I do when I find an incorrect credit report?
You should contact the credit bureau that reported the error as well as the lender who provided the inaccurate information if you find an error in your credit report.