Credit scores are often a deciding factor in our lives. They can mean the difference between being approved for loans, getting our dream apartment and having to settle for less desirable ones, or even being considered as a candidate for certain 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.
Payday loans: How to Use Them
Payday loans are a costly mistake. These loans have high rates of interest and fees which can spiral out-of-control quickly.
Failure to communicate With Lenders
Failing to communicate with your lenders can lead to missed payments and damaged credit. Speak to your lenders about any difficulties you may be having making payments.
Applying for Too Much Credit at Once
Applying for more than one line of credit in short periods of time will hurt your score. To avoid making this mistake, space out your applications for credit.
A co-signer who does not have a plan
If you co-sign a loan without planning, it can lead to a financial crisis. Have a plan for handling payments in the event that the primary borrower defaults before co-signing.
How to Apply for Retail Store Cards
These cards come with high interest rates and fees. Before applying for retail store credit cards, think carefully.
Not Having a Budget
A lack of a budget may lead to late payments and overspending. Avoid this mistake by creating a budget.
Avoiding Credit Repair Scams
Credit repair scams can be tempting, but they often come with high fees and little to no results. Avoid these scams by working with reputable credit repair agencies or improving your credit score on your own.
You Should Not Use Your Credit Cards
Your credit score may be negatively impacted if you don't use your credit cards. Use your cards regularly and pay them off in full to build credit.
Not Paying Attention to Balance Transfers
Balance transfers, while useful for consolidating your debts can also be expensive and come with high rates of interest. Attention to terms and conditions for any balance transfer offers.
Don't Ignore your Credit Score
Ignoring a credit score is a bad idea. Regularly checking your score will help you to identify improvement areas and track your progress.
Maximum Credit Card Limits
The impact of maxing out credit cards on your credit rating can be significant. Maintain your credit card utilization rate at less than 30% of total credit.
Avoiding these credit mistakes, and improving your credit score can help you improve your financial standing. You will be able to qualify for better rates and loans, as well as improve your overall financial situation.
Frequently Asked Question
What is a high credit score?
A good credit score is typically considered to be 700 or above.
How often should I review my credit report and score?
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?
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 be done if there is an error on my 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.