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. Therefore, it's essential to understand the common credit mistakes to avoid and how to fix them. This article highlights 8 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
- Not Understanding Your Interest Rates
Understanding your interest rates is important to avoid unexpected charges. To understand your interest rate, read your credit card contract carefully.
- Using Payday Loans
Payday loans can be expensive. These loans come with high fees and interest rates, which can spiral quickly out of control.
- What to do if you are a co-signer without a plan
If you co-sign a loan without planning, it can lead to a financial crisis. Be sure to have a backup plan for payments if you are co-signing the loan.
- Not Building an Emergency Fund
Not having an emergency fund can lead to missed payments and damaged credit. Create an emergency fund and avoid this mistake.
- Credit Repair Scams to Avoid
Credit repair scams can be tempting, but they often come with high fees and little to no results. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
- Having too many credit cards
Having too many cards can lead you to overspend or miss payments. Your credit card account number should be kept to a minimum.
- Applying for Retail Store Credit Cards
It can be tempting to apply for a retail store credit card, but the cards usually come with high interest rates. Consider carefully whether you want to apply for this type of credit card.
- Neglecting Credit Card Benefits
Credit cards are often accompanied by rewards and benefits. These perks will help you get the most from your credit cards.
By avoiding the common mistakes that people make with their credit scores and by taking action to improve it, you will be in a much better financial situation. You will be able to qualify for better rates and loans, as well as improve your overall financial situation.
The Most Frequently Asked Questions
What is an excellent credit score?
Typically, a credit score of 700 and above is considered good.
How often should I review my credit report and score?
It's recommended that you check your credit report at least once a year.
Can repaying a loan earlier hurt my credit?
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?
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 be doing if I discover an error in my credit report?
You can dispute an error you find on your credit file by contacting the credit bureau responsible for the error, as well the lender who supplied the incorrect information.