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 highlights 8 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
- You Can't Ignore Credit Card Benefits
Many credit cards offer rewards and other benefits. To get the best out of your card, take advantage of these benefits.
- Not Understanding Your Interest Rates
Not understanding your interest rates can lead to unexpected fees and charges. Understand your interest rates by reading your credit card agreement.
- Having Too Many Credit Cards
Too many credit card accounts can lead to missed payments and overspending. You should limit the number of your credit cards to manageable numbers.
- Don't Use Your Credit Card
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.
- Do not Pay Attention to Transfers of Balance
Balance transfers may be an effective tool to consolidate your debts but they also can have high fees and interest rates. Pay attention to the terms of any balance transfer offers.
- Don't Ignore your Credit Score
Ignoring your credit score can be detrimental. Regularly monitoring your score allows you to track and improve your progress.
- Using Payday Loans
Using payday loans can be a costly mistake. These loans come with high fees and interest rates, which can spiral quickly out of control.
- Close Old Credit Card Accounts
Closing an old credit card account can impact your credit score negatively. Keep old accounts to lengthen your credit history.
By avoiding these common credit mistakes and taking steps to improve your credit score, you can put yourself in a better financial position. You will be able to qualify for better rates and loans, as well as improve your overall financial situation.
Frequently Asked Questions
What is an excellent credit score?
Typically, a credit score of 700 and above is considered good.
How often should I review my credit report and score?
You should check your credit score at least once per year.
Can paying off a loan early hurt 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?
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 when I find an incorrect credit report?
If you discover an error on your report, you can dispute it both with the credit bureau who reported the error and with the lender which provided the inaccurate data.