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. Determining how to correct and avoid common credit mistakes is essential. This article will 9 the most common mistakes in credit and give practical tips to correct them.
- Late Payments
Paying your bills late is a common mistake that can hurt your credit score. Payments that are late can remain on your credit reports for up to 7 years. Set up automatic payments to pay on-time.
- Credit Repair Scams to Avoid
Credit repair scams might be tempting, however they are often expensive and produce little to nothing. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
- 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 can help consolidate your debt, but there are also fees and high interest rates. Attention to terms and conditions for any balance transfer offers.
- A co-signer who does not have a plan
A co-signer who does not have a plan in place can land you in a bad financial situation. Have a plan for handling payments in the event that the primary borrower defaults before co-signing.
- Payday loans: How to Use Them
Using payday loans can be a costly mistake. These loans come with high fees and interest rates, which can spiral quickly out of control.
- Closing 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 your old accounts open if you want to build up a longer credit history.
- You Should Check Your Credit Report
To ensure there are not any mistakes or fraudulent acts, it is important that you review your report regularly. Each of the major credit bureaus will provide you with your free credit report once a calendar year.
- Why You Should Not Build an Emergency Fund
A lack of an emergency fund may lead to missed payments or damaged credit. Avoid this mistake by building an emergency fund.
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. Not only will this help you qualify for loans and better interest rates, but it can also improve your overall financial well-being.
The Most Frequently Asked Questions
What is a high credit score?
700 is generally considered a good score.
How often should you check your credit report?
At least once a calendar year, you should review your credit report.
Can early repayment of a credit card affect my credit score?
Paying off your loan early will actually improve your score. This is because it reduces your credit utilization and shows lenders that you are responsible when using credit.
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 if a mistake is found 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.