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. Determining how to correct and avoid common credit mistakes is essential. This article will highlight 8 of the most common credit mistakes and provide practical tips on how to address them.
- You Should Check Your Credit Report
Reviewing your credit reports regularly is essential to ensure there aren't errors or fraudulent actions. Once a year, you can get your credit report from the three main credit bureaus.
- Closing old credit card accounts
Closing an old credit card account can impact your credit score negatively. Keep old accounts to lengthen your credit history.
- Why You Should Not Build an Emergency Fund
Not having an emergency fund can lead to missed payments and damaged credit. Avoid this mistake by building an emergency fund.
- Not Having a Budget
Budgeting can help you avoid overspending or late payments. Avoid this mistake by creating a budget.
- Loans with Cosigners
Your credit score may be affected if the borrower defaults. Cosigning a loan can negatively impact your credit score if the borrower defaults.
- Maximum Credit Card Limits
Maxing out your credit cards can have a significant impact on your credit score. Keep your credit utilization rate below 30% of your total credit limit.
- Failure to communicate with lenders
Missed payments and damaged credits can be the result of failing to communicate. Reach out to your lenders if you're struggling to make payments.
- Avoiding Credit Repair Scams
Credit repair scams might be tempting, however they are often expensive and produce little to nothing. Avoid these scams through working with reputable credit agencies or by improving your credit rating on your own.
By avoiding the common mistakes that people make with their credit scores and by taking action to improve it, you will be in a much better financial situation. Not only will this help you qualify for loans and better interest rates, but it can also improve your overall financial well-being.
Frequently Asked Questions
What is a high credit score?
700 is generally considered a good score.
How often do I need to check my credit score?
You should check your credit score at least once per year.
Can repaying a loan earlier hurt my credit?
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?
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?
If you find an error on your credit report, you should dispute it with the credit bureau reporting the error and the lender that provided the inaccurate information.