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. 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.
- Not Using Your Credit Cards
Not using your credit cards can impact your credit score negatively. Use your cards regularly and pay them off in full to build credit.
- Why You Should Never Check Your Credit Report
Regularly reviewing your credit report is important to ensure that there aren't any errors or fraudulent activity. Once a year, you can get your credit report from the three main credit bureaus.
- Don't Build an Emergency Fund
Not having an emergency fund can lead to missed payments and damaged credit. Create an emergency fund and avoid this mistake.
- Retail Store Credit Cards: How to Apply
Retail store credit cards are tempting but they come with high fees and interest rates. Do your research before applying for any retail store credit card.
- You don't have a budget
A lack of a budget may lead to late payments and overspending. Create a budget and stick to it to avoid this mistake.
- Closing Old Credit Card Accounts
Closing an old credit card account can impact your credit score negatively. Keep your old accounts open if you want to build up a longer credit history.
- Maximum Credit Card Limits
Credit card maxing can have an impact on your score. Your credit utilization rate should not exceed 30% of your total limit.
- You can't get too much credit at once
Applying for more than one line of credit in short periods of time will hurt your score. This mistake can be avoided by spacing out your credit applications.
Avoiding these common mistakes in credit and taking the necessary steps to improve credit can help you achieve a better financial status. Not only will this help you qualify for loans and better interest rates, but it can also improve your overall financial well-being.
FAQs
What is a high credit score?
700 is generally considered a good score.
How often should you check your credit report?
You should check your credit score at least once per year.
Can paying off a loan early hurt my 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?
While it takes some time to improve credit scores, there are things you can do right away that will show results. For example, paying off your debts or fixing any errors in your credit 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.