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. It's important to know how to fix credit mistakes and avoid them. This article highlights 12 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
Applying for Retail Store Credit Cards
Although applying for retail store cards may be tempting, they often have high rates of interest and fees. Think carefully before applying for these types of credit cards.
Too Many Credit Card Accounts
Too many credit card accounts can lead to missed payments and overspending. Keep your credit card accounts to a manageable number.
Cosigning Loans
If the person you cosigned for defaults on their loan, it can have a negative impact on your credit rating. Cosigning a loan can negatively impact your credit score if the borrower defaults.
Avoid Using 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.
Close Old Credit Card Accounts
Closing old credit card accounts can negatively impact your credit score. Keep old accounts open to increase the length of your credit history.
A co-signer who does not have a plan
Co-signing without a plan could put you in an uncomfortable financial position. Prepare a payment plan before you co-sign a loan.
You may not be paying attention to balance transfers
Balance transfers are a great way to consolidate debts, but can come with high interest rates and fees. You should pay attention to any terms associated with a balance transfer offer.
Late Payments
Payment of bills late can harm your credit score. Late payments may remain on your report for seven years. Set up automatic payments or reminders to ensure you pay on time.
Failure to communicate with lenders
Communication is key to avoid missed payments or damage to credit. Reach out to your lenders if you're struggling to make payments.
In default on Loans
Delay in repaying a loan will have a negative impact on your credit report. Contact your lender to talk about options for repayment if you are struggling to pay.
Not Building 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.
You Should Check Your Credit Report
It's important to review your credit report regularly to ensure there are no errors or fraudulent activity. Once a year, you can get your credit report from the three main credit bureaus.
Avoiding these common mistakes in credit and taking the necessary steps to improve credit can help you achieve a better financial status. 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 should I review my credit report and score?
Check your credit report every year.
Can paying off a loan early hurt my credit score?
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?
Improving your credit score takes time, but there are steps you can take to see results within a few months, such as paying off debt and correcting errors on your credit report.
What should i do if a mistake is found on my credit report?
You should contact the credit bureau that reported the error as well as the lender who provided the inaccurate information if you find an error in your credit report.