When we go through life, the credit score we have can be the difference of getting approved for our loan, getting into our dream apartments or being forced to settle on a less-than-ideal one, or even being given consideration for certain positions. Understanding the most common credit errors to avoid, and how to correct them, is therefore essential. This article will highlight 9 of the most common credit mistakes and provide practical tips on how to address them.
- Not Using Your Credit Cards
Your credit score can be negatively affected if you do not use your credit card. You can build credit by using and paying off your cards regularly.
- No emergency fund?
A lack of an emergency fund may lead to missed payments or damaged credit. Build an emergency fund to avoid this mistake.
- Maximizing Credit Card Limits
Your credit score can be affected by maxing out your cards. Keep your credit utilization rate below 30% of your total credit limit.
- 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 older accounts open to improve your credit history.
- Foreclosure on Loans
If you default on a credit card, it can severely impact your credit rating. Speak to your lender about possible repayment options if you have trouble making payments.
- Not Understanding Your Interest Rates
You may incur unexpected charges and fees if you do not know your rates. It is important to read the terms and conditions of your credit cards carefully.
- The Balance Transfers: Don't Miss Out
Balance transfers, while useful for consolidating your debts can also be expensive and come with high rates of interest. Be sure to read the fine print of any offers for balance transfers.
- Ignoring your credit score
Ignoring your score can have a negative impact. Regularly monitoring your score allows you to track and improve your progress.
- Failure to communicate with lenders
If you don't communicate with your lender, it can lead to missed payment and damaged credit. Reach out to your lenders if you're struggling to make payments.
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.
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 check my credit report?
Check your credit report every year.
Paying off a loan before the due date can hurt your credit score.
Paying off a loan early can actually help your credit score by reducing your credit utilization rate and showing lenders that you're responsible with credit.
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 when I find an incorrect 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.