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. Understanding the most common credit errors to avoid, and how to correct them, is therefore essential. This article will highlight 11 of the most common credit mistakes and provide practical tips on how to address them.
Not Paying Attention to Balance Transfers
Balance transfers may be an effective tool to consolidate your debts but they also can have high fees and interest rates. Take note of the conditions of any balance-transfer offers.
Why You Should Not Build an Emergency Fund
Lack of emergency funds can cause missed payments and damage to credit. To avoid making this mistake, create an emergency fund.
Not Understanding Your Interest Rates
Understanding your interest rates is important to avoid unexpected charges. Read your credit card agreement carefully to understand your rates.
In default on Loans
Defaulting on a loan can have a severe impact on your credit score. Reach out to your lender to discuss repayment options if you're struggling to make payments.
Not Using Your Credit Cards
Credit scores can be affected negatively by not using credit cards. Use your cards regularly and pay them off in full to build credit.
Cosigning Loans
You can lose your credit score by cosigning for someone else if they default. Before cosigning a loan for someone else, think carefully.
Credit Repair Scams: Beware!
Credit repair scams can be tempting, but they often come with high fees and little to no results. Avoid scams and improve your credit by yourself or working with reputable companies.
Ignoring Credit Card Benefits
Credit cards are often accompanied by rewards and benefits. To get the best out of your card, take advantage of these benefits.
Applying for Too Much Credit at Once
Applying for multiple lines of credit in a short amount of time can hurt your credit score. Space out your credit applications to avoid this mistake.
Closing Old Credit Card Accounts
Closing old credit card accounts can negatively impact your credit score. Keep old accounts to lengthen your credit history.
Neglecting Your Credit Score
Ignoring credit scores can have negative consequences. Regularly checking your score can help you identify areas for improvement and track your progress.
By avoiding these common credit mistakes and taking steps to improve your credit score, you can put yourself in a better financial position. Not only can you get better interest rates and qualify for more loans, but your financial position will also improve.
FAQs
What is a high credit score?
700 is usually considered a good credit score.
How often can I check my credit rating?
Check your credit report every year.
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?
You can improve your credit rating over time by taking certain steps, like paying off debt or correcting mistakes 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.