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. It's important to know how to fix credit mistakes and avoid them. This article will 11 the most common mistakes in credit and give practical tips to correct them.
Failing to Communicate with Lenders
Communication is key to avoid missed payments or damage to credit. You should contact your lenders immediately if you find yourself struggling to pay.
Avoid Using Credit Cards
Your credit score may be negatively impacted if you don't use your credit cards. Build credit by using your cards and paying them off regularly.
Not Understanding Your Interest Rates
Understanding your interest rates is important to avoid unexpected charges. You should read the credit card agreement to fully understand your rate.
Late Payments
A common mistake is paying your bills late. This can negatively impact your credit score. Late payments may remain on your report for seven years. You can set up automatic payments and reminders to make sure you pay on time.
You don't have a budget
Without a budget, you may end up overspending your money and paying late. To avoid this error, create a budget.
Maxing out Credit Cards
Credit card maxing can have an impact on your score. Keep your credit use rate under 30%.
Not Building an Emergency Fund
A lack of an emergency fund may lead to missed payments or damaged credit. Create an emergency fund and avoid this mistake.
Not Checking Your Credit Report
To ensure there are not any mistakes or fraudulent acts, it is important that you review your report regularly. You can obtain your credit history for free from each major credit bureau once per year.
Refusal to Pay Back Loans
If you default on a credit card, it can severely impact your credit rating. If you are having trouble making payments, contact your lender and ask about repayment options.
Payday Loans: Use them to your advantage
A payday loan can be an expensive mistake. These loans come with high fees and interest rates, which can spiral quickly out of control.
Applying for Retail Store Credit Cards
Applying for retail store credit cards can be tempting, but these cards often come with high-interest rates and fees. Think carefully before applying for these types of credit cards.
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.
FAQs
What is a good credit score?
A credit score of 700 or more is considered good.
How often should you check your credit report?
It's recommended that you check your credit report at least once a year.
Can repaying a loan earlier hurt my credit?
Paying back a loan earlier can actually increase your credit score. This happens by reducing credit utilization rates and showing lenders you are responsible.
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 be doing if I discover an error in my credit report?
If you find a mistake on your credit score, you should contact both the credit bureau indicating the error and lender that provided inaccurate information.