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. To avoid making these mistakes, you must know what to do. This article will highlight 11 of the most common credit mistakes and provide practical tips on how to address them.
Failure to repay a loan
A default on a loan could have a serious impact on your score. Talk to your lender if payment is a problem.
Payday loans: How to Use Them
Payday loans can be expensive. These loans come with high fees and interest rates, which can spiral quickly out of control.
Too Many Credit Card Accounts
A large number of credit cards can cause you to overspend and miss payments. Maintain a reasonable number of credit card accounts.
Late Payments
Late payments can damage your credit rating. Late payments can be recorded on your credit history for up seven years. Set up automatic payments or reminders to ensure you pay on time.
Maximum Credit Card Limits
Credit card maxing can have an impact on your score. Keep your credit utilization rate below 30% of your total credit limit.
Applying For Too Much Credit At Once
Applying for multiple lines of credit in a short amount of time can hurt your credit score. Avoid this mistake by spreading out your credit application.
What to do if you fall for credit repair scams
These scams often involve high fees with little to no return. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
Not Paying Attention to Balance Transfers
Balance transfers are a great way to consolidate debts, but can come with high interest rates and fees. Take note of the conditions of any balance-transfer offers.
Not Understanding Your Interest Rates
Unexpected fees and charges can occur if you don't understand your interest rate. Read your credit card agreement carefully to understand your rates.
Not Having a Budget
A lack of a budget may lead to late payments and overspending. To avoid this error, create a budget.
The Problem of a Co-Signer Without a Plan
Being a co-signer without a plan can put you in a difficult financial situation. Have a plan for handling payments in the event that the primary borrower defaults before co-signing.
Avoiding these credit mistakes, and improving your credit score can help you improve your financial standing. Not only will this help you qualify for loans and better interest rates, but it can also improve your overall financial well-being.
FAQs
What is a high credit score?
A credit score of 700 or more is considered good.
How often do I need to check my credit score?
It's recommended that you check your credit report at least once a year.
Paying off a loan before the due date can hurt your 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?
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?
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.