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. Understanding the most common credit errors to avoid, and how to correct them, is therefore essential. This article highlights 11 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
- Payday loans: How to Use Them
Payday loans may be a costly error. These loans have high rates of interest and fees which can spiral out-of-control quickly.
- Don't Ignore your Credit Score
Neglecting your credit score could be harmful. Regularly checking your score can help you identify areas for improvement and track your progress.
- Too Many Credit Card Accounts
Too many credit cards may lead to excessive spending and missed payments. Your credit card account number should be kept to a minimum.
- The Budget Problem
If you don't have a plan, it can lead to excessive spending and late payments. Avoid this mistake by creating a budget.
- Not Checking Your Credit Report
Reviewing your credit reports regularly is essential to ensure there aren't errors or fraudulent actions. Once a year, you can get your credit report from the three main credit bureaus.
- Applying for too Much Credit All at Once
Your credit score can be negatively affected if you apply for several lines of credit within a short time period. To avoid making this mistake, space out your applications for credit.
- Late Payments
Paying your bills late is a common mistake that can hurt your credit score. Late payments can stay on your credit report for up to seven years. Set up automatic payments to pay on-time.
- Don't Use Your Credit Card
Credit scores can be affected negatively by not using credit cards. Credit is built by paying off your credit cards in full and using them regularly.
- No emergency fund?
Not having an emergency fund can lead to missed payments and damaged credit. Build an emergency fund to avoid this mistake.
- Failure to repay a loan
A default on a loan could have a serious impact on your score. Contact your lender to talk about options for repayment if you are struggling to pay.
- Retail Store Card Application
These cards come with high interest rates and fees. Think carefully before applying for these types of credit cards.
You can improve your financial situation by avoiding common credit mistakes. You will be able to qualify for better rates and loans, as well as improve your overall financial situation.
Frequently Asked Questions
What is an excellent 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 repaying a loan earlier hurt my credit?
Paying off a loan early can actually help your credit score by reducing your credit utilization rate and showing lenders that you're responsible with credit.
Can I improve my credit score quickly?
The process of improving your credit score can take time. However, you can make progress in just a few months by settling debts, and repairing errors on your reports.
What should I do if I find an error on my credit report?
If you discover an error on your report, you can dispute it both with the credit bureau who reported the error and with the lender which provided the inaccurate data.