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. Determining how to correct and avoid common credit mistakes is essential. This article will highlight 10 of the most common credit mistakes and provide practical tips on how to address them.
Retail Store Credit Cards: How to Apply
Although applying for retail store cards may be tempting, they often have high rates of interest and fees. Do your research before applying for any retail store credit card.
Late Payments
Payment of bills late can harm your credit score. Late payments can be recorded on your credit history for up seven years. Set up automatic payments to pay on-time.
Not Understanding Your Interest Rates
You may incur unexpected charges and fees if you do not know your rates. Understand your interest rates by reading your credit card agreement.
Being a Co-Signer Without a Plan
Being a co-signer without a plan can put you in a difficult financial situation. You should have a plan to handle the payments in case the primary borrower fails.
You Should Check Your Credit Report
Regularly reviewing your credit report is important to ensure that there aren't any errors or fraudulent activity. You can access your credit report for free once a year from each of the three major credit bureaus.
Maxing Out Credit Cards
The impact of maxing out credit cards on your credit rating can be significant. Your credit utilization rate should not exceed 30% of your total limit.
Cosigning Loans
When someone defaults on a loan that you cosigned, your credit score can be negatively affected. Before cosigning a loan for someone else, think carefully.
Credit Repair Scams: Beware!
Credit repair scams are tempting, but often they come with high fees for little or no results. Avoid these scams through working with reputable credit agencies or by improving your credit rating on your own.
The Budget Problem
Budgeting can help you avoid overspending or late payments. Avoid this mistake by creating a budget.
Using Payday Loans
Payday loans are a costly mistake. These loans are often associated with high interest rates and fees that can quickly spiral out of control.
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.
Common Questions
What is the definition of a good credit rating?
A good credit score is typically considered to be 700 or above.
How often do I need to check my credit score?
Check your credit report every year.
Can early repayment of a credit card affect my credit score?
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?
You can improve your credit rating over time by taking certain steps, like paying off debt or correcting mistakes on your credit report.
What should I do when I find an incorrect 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.