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. To avoid making these mistakes, you must know what to do. This article highlights 12 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
Using Payday Loans
Using payday loans can be a costly mistake. These loans are often associated with high interest rates and fees that can quickly spiral out of control.
A co-signer who does not have a plan
You can find yourself in a tough financial situation if you are a cosigner with no plan. Before co-signing a loan, have a plan in place for how you'll handle payments if the primary borrower defaults.
No Budget
Without a budget, you may end up overspending your money and paying late. Create a budget and stick to it to avoid this mistake.
Refusal to Pay Back Loans
If you default on a credit card, it can severely impact your credit rating. Contact your lender to talk about options for repayment if you are struggling to pay.
Do not use your credit cards
Not using your credit cards can impact your credit score negatively. To build credit, use your cards frequently and pay them in full.
Ignoring Your Credit Score
Ignoring your credit score can be detrimental. Regularly checking your score can help you identify areas for improvement and track your progress.
Neglecting Credit Card Benefits
Many credit cards offer rewards and other benefits. Take advantage of these perks to get the most out of your credit cards.
Credit Repair Scams: Beware!
These scams often involve high fees with little to no return. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
Maximum Credit Card Limits
Your credit score can be affected by maxing out your cards. Maintain your credit card utilization rate at less than 30% of total credit.
Why You Should Not Build an Emergency Fund
If you don't have an emergency fund, it can lead to missed payment and damage your credit. To avoid making this mistake, create an emergency fund.
Having too many credit cards
Too many credit card accounts can lead to missed payments and overspending. Your credit card account number should be kept to a minimum.
Loans with Cosigners
Your credit score may be affected if the borrower defaults. Cosigning a loan can negatively impact your credit score if the borrower defaults.
You can improve your financial situation by avoiding common credit mistakes. Not only will this help you qualify for loans and better interest rates, but it can also improve your overall financial well-being.
Frequently Asked Questions
What is considered a good score for credit?
Typically, a credit score of 700 and above is considered good.
How often should I review my credit report and score?
At least once a calendar year, you should review your credit report.
Paying off a loan before the due date can hurt your 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?
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 find a mistake on your credit score, you should contact both the credit bureau indicating the error and lender that provided inaccurate information.