Credit scores are often a deciding factor in our lives. They can mean the difference between being approved for loans, getting our dream apartment and having to settle for less desirable ones, or even being considered as a candidate for certain jobs. Determining how to correct and avoid common credit mistakes is essential. This article highlights 10 some of the most frequent credit mistakes, and provides practical tips on how you can address them.
- You can't get too much credit at once
If you apply for many lines of credit at once, it can damage your credit score. To avoid making this mistake, space out your applications for credit.
- The Problem of a Co-Signer Without a Plan
You can find yourself in a tough financial situation if you are a cosigner with no plan. Prepare a payment plan before you co-sign a loan.
- Have Too Many Credit Cards
Having too many cards can lead you to overspend or miss payments. Limit the number of credit cards you have.
- Refusal to Pay Back Loans
Your credit score can be severely affected by defaulting on a debt. Contact your lender to talk about options for repayment if you are struggling to pay.
- Using Payday Loans
Payday loans are a costly mistake. These loans come with high fees and interest rates, which can spiral quickly out of control.
- Late Payments
Late payments can damage your credit rating. Late payments will remain on a credit report for a period of up to seven year. Set up automatic payment or reminders so you don't miss payments.
- Retail Store Card Application
Although applying for retail store cards may be tempting, they often have high rates of interest and fees. Be careful before you apply for these credit cards.
- Falling for Credit Repair Scams
Credit repair scams might be tempting, however they are often expensive and produce little to nothing. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
- Not Having a Budget
Without a budget, you may end up overspending your money and paying late. To avoid this error, create a budget.
- Don't Pay Attention to Balance Transfers
Balance transfers, while useful for consolidating your debts can also be expensive and come with high rates of interest. Pay attention to the terms of any balance transfer offers.
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.
Frequently Asked Question
What is a good credit score?
Typically, a credit score of 700 and above is considered good.
How often should you check your credit report?
You should check your credit score at least once per year.
Can repaying a loan earlier hurt my credit?
Paying back a loan earlier can actually increase your credit score. This happens by reducing credit utilization rates and showing lenders you are responsible.
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 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.