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. It's important to know how to fix credit mistakes and avoid them. This article will highlight 10 of the most common credit mistakes and provide practical tips on how to address them.
- Don't Build an Emergency Fund
Lack of emergency funds can cause missed payments and damage to credit. Create an emergency fund and avoid this mistake.
- Failing to communicate with Lenders
Missed payments and damaged credits can be the result of failing to communicate. Speak to your lenders about any difficulties you may be having making payments.
- Maximizing Credit Card Limits
Maxing out your credit cards can have a significant impact on your credit score. Your credit utilization rate should not exceed 30% of your total limit.
- Foreclosure on Loans
If you default on a credit card, it can severely impact your credit rating. Reach out to your lender to discuss repayment options if you're struggling to make payments.
- How to Apply for Retail Store Cards
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.
- Not Checking Your Credit Report
You should review your credit report on a regular basis to make sure there are no mistakes or fraudulent activities. Once a year, you can get your credit report from the three main credit bureaus.
- You Can't Ignore Credit Card Benefits
Credit cards are often accompanied by rewards and benefits. You can get the most value from your credit card by taking advantage of these rewards.
- The Balance Transfers: Don't Miss Out
Balance transfers are a great way to consolidate debts, but can come with high interest rates and fees. Be sure to read the fine print of any offers for balance transfers.
- You can't get too much credit at once
Applying for multiple lines of credit in a short amount of time can hurt your credit score. This mistake can be avoided by spacing out your credit applications.
- Late Payments
Paying your bills late is a common mistake that can hurt your credit score. Payments that are late can remain on your credit reports for up to 7 years. Automate payments or set reminders for you to pay on time.
By avoiding these common credit mistakes and taking steps to improve your credit score, you can put yourself in a better financial position. This will not only help you qualify to receive loans with better interest rates but also improve your financial health.
Frequently Asked Question
What is the definition of a good credit rating?
A good credit score is typically considered to be 700 or above.
How often can I check my credit rating?
You should check your credit score at least once per year.
Can paying off a loan early hurt my credit score?
By reducing your credit usage rate, you can improve your credit score and show lenders that your are 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 I do if I find an error on my credit 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.