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. To avoid making these mistakes, you must know what to do. This article will highlight the 8 most common credit mistakes as well as provide practical tips for how to deal with them.
- Closing old credit card accounts
Close old credit cards to improve your credit rating. Keep older accounts open to improve your credit history.
- Not Understanding Your Interest Rates
If you do not understand your rates, you may be charged unexpected fees. Read your credit card agreement carefully to understand your rates.
- Do Not Build an Emergency Fund
If you don't have an emergency fund, it can lead to missed payment and damage your credit. Build an emergency fund to avoid this mistake.
- Have Too Many Credit Cards
Too many credit card accounts can lead to missed payments and overspending. Keep your credit card accounts to a manageable number.
- Neglecting Credit Card Benefits
Credit cards usually come with rewards or benefits. To get the best out of your card, take advantage of these benefits.
- Don't Use Your Credit Card
Not using your credit cards can impact your credit score negatively. You can build credit by using and paying off your cards regularly.
- Failure to communicate With Lenders
If you don't communicate with your lender, it can lead to missed payment and damaged credit. Contact your lenders if payment is a problem.
- Credit Repair Scams: Beware!
Credit repair scams may be tempting but they usually come with high costs and little to no result. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
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. You will be able to qualify for better rates and loans, as well as improve your overall financial situation.
Frequently Asked Questions
What is a good credit score?
700 is generally considered a good score.
How often should I check my credit report?
It's recommended that you check your credit report at least once a year.
Paying off a loan before the due date can hurt your 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?
The process of improving your credit score can take time. However, you can make progress in just a few months by settling debts, and repairing errors on your reports.
What should I be doing if I discover an error in my credit report?
If you find a mistake on your credit score, you should contact both the credit bureau indicating the error and lender that provided inaccurate information.