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. It's important to know how to fix credit mistakes and avoid them. This article will 12 the most common mistakes in credit and give practical tips to correct them.
Failing to Communicate with Lenders
Failure to communicate with lenders can result in missed payments and damage to your credit. Reach out to your lenders if you're struggling to make payments.
The Budget Problem
A lack of a budget may lead to late payments and overspending. Create a budget and stick to it to avoid this mistake.
Retail Store Credit Card Applications
Applying for retail store credit cards can be tempting, but these cards often come with high-interest rates and fees. Do your research before applying for any retail store credit card.
Close Old Credit Card Accounts
Closing a credit card account that is older than 3 years can have a negative impact on your credit score. Keep old accounts to lengthen your credit history.
Applying for Too Much Credit at Once
Applying for more than one line of credit in short periods of time will hurt your score. Avoid this mistake by spreading out your credit application.
Don't Use Your Credit Card
Your credit score may be negatively impacted if you don't use your credit cards. You can build credit by using and paying off your cards regularly.
Avoiding 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.
Cosigning loans
When someone defaults on a loan that you cosigned, your credit score can be negatively affected. Think carefully before cosigning for someone else.
You may not be paying 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. Be sure to read the fine print of any offers for balance transfers.
Late Payments
Payment of bills late can harm your credit score. Late payments may remain on your report for seven years. Automate payments or set reminders for you to pay on time.
Maximum Credit Card Limits
Maxing out your credit cards can have a significant impact on your credit score. Keep your credit utilization rate below 30% of your total credit limit.
Not Building an Emergency Fund
Not having an emergency fund can lead to missed payments and damaged credit. Avoid this mistake by building an emergency fund.
Avoiding these credit mistakes, and improving your credit score can help you improve your financial standing. Not only can you get better interest rates and qualify for more loans, but your financial position will also improve.
Frequently Asked Questions
What is a high credit score?
700 is usually considered a good credit score.
How often can I check my credit rating?
At least once a calendar year, you should review your credit report.
Can paying off a loan early hurt my credit score?
Paying a loan off early can help improve your credit rating by reducing the credit utilization rate. It also shows creditors that you're a responsible borrower.
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?
If you find a mistake on your credit score, you should contact both the credit bureau indicating the error and lender that provided inaccurate information.