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. Therefore, it's essential to understand the common credit mistakes to avoid and how to fix them. This article will provide tips and tricks on how to fix the most common credit errors.
- Have 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.
- Retail Store Card Application
Applying for retail store credit cards can be tempting, but these cards often come with high-interest rates and fees. Before applying for retail store credit cards, think carefully.
- Ignoring Your Credit Score
Ignoring a credit score is a bad idea. Regularly checking your score will help you to identify improvement areas and track your progress.
- Ignoring Credit Card Benefits
Many credit cards offer rewards and other benefits. You can get the most value from your credit card by taking advantage of these rewards.
- What to do if you are a co-signer without a plan
Co-signing without a plan could put you in an uncomfortable financial position. You should have a plan to handle the payments in case the primary borrower fails.
- 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.
- Do Not Build 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.
- 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. Be sure to read the fine print of any offers for balance transfers.
- Defaulting on Loans
Your credit score can be severely affected by defaulting on a debt. If you are having trouble making payments, contact your lender and ask about repayment options.
- Payday Loans: Use them to your advantage
Payday loans can be expensive. These loans have high rates of interest and fees which can spiral out-of-control quickly.
Avoiding these common mistakes in credit and taking the necessary steps to improve credit can help you achieve a better financial status. Not only can you get better interest rates and qualify for more loans, but your financial position will also improve.
The Most Frequently Asked Questions
What is the definition of a good credit rating?
700 is generally considered a good score.
How often should I check my credit report?
You should check your credit score at least once per year.
Is it possible to damage my credit rating by paying off an early loan?
Paying a loan off early can help improve your credit rating by reducing the credit utilization rate. It also shows creditors that you're a responsible borrower.
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 be done if there is an error on my report?
You can dispute an error you find on your credit file by contacting the credit bureau responsible for the error, as well the lender who supplied the incorrect information.