In our daily lives, our credit scores can make a big difference. They may determine whether we are approved for a mortgage or not, if we get our dream home or settle for something less desirable, and if certain jobs will be considered. Therefore, it's essential to understand the common credit mistakes to avoid and how to fix them. This article will highlight 11 of the most common credit mistakes and provide practical tips on how to address them.
Maxing Out Credit Cards
Credit card maxing can have an impact on your score. Keep your credit use rate under 30%.
Being a Co-Signer Without a Plan
You can find yourself in a tough financial situation if you are a cosigner with no plan. Have a plan for handling payments in the event that the primary borrower defaults before co-signing.
Cosigning loans
Cosigning a loan for someone else can negatively impact your credit score if they default on the loan. Be careful before you cosign for another person.
Ignoring your credit score
Ignoring a credit score is a bad idea. Checking your credit score regularly can help you track your progress, identify areas where your score needs improvement, and identify any improvements.
You Should Check Your Credit Report
Regularly reviewing your credit report is important to ensure that there aren't any errors or fraudulent activity. Once a year, you can get your credit report from the three main credit bureaus.
Close Old Credit Card Accounts
Closing an old credit card account can impact your credit score negatively. Keep old accounts to lengthen your credit history.
Don't ignore the benefits of credit cards
Credit cards often come with rewards and benefits. Use these benefits to make the most of your credit card.
Late Payments
Payment of bills late can harm your credit score. Late payments can be recorded on your credit history for up seven years. Set up automatic payment or reminders so you don't miss payments.
Not Understanding Your Interest Rates
If you do not understand your rates, you may be charged unexpected fees. To understand your interest rate, read your credit card contract carefully.
Retail Store Card Application
It can be tempting to apply for a retail store credit card, but the cards usually come with high interest rates. Be careful before you apply for these credit cards.
Avoiding Credit Repair Scams
Credit repair scams are tempting, but often they come with high fees for little or no results. Avoid these scams by working with reputable credit repair agencies or improving your credit score on your own.
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.
FAQs
What is a good credit score?
700 is usually considered a good credit score.
How often should I review my credit report and score?
At least once a calendar year, you should review your credit report.
Is it possible to damage my credit rating by paying off an early loan?
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?
While it takes some time to improve credit scores, there are things you can do right away that will show results. For example, paying off your debts or fixing any errors in your credit report.
What should I do when I find an incorrect credit report?
If you find an error on your credit report, you should dispute it with the credit bureau reporting the error and the lender that provided the inaccurate information.