In our daily lives, our credit scores can make a big difference. They may determine whether we are approved for a mortgage or not, if we get our dream home or settle for something less desirable, and if certain jobs will be considered. Understanding the most common credit errors to avoid, and how to correct them, is therefore essential. This article will highlight the 9 most common credit mistakes as well as provide practical tips for how to deal with them.
- Payday Loans
Payday loans can be expensive. These loans have high rates of interest and fees which can spiral out-of-control quickly.
- Do Not Build an Emergency Fund
Missed payments and credit damage can result from not having an emergency reserve. Avoid this mistake by building an emergency fund.
- Maxing Out Credit Cards
Credit card maxing can have an impact on your score. Keep your credit utilization rate below 30% of your total credit limit.
- Don't Use Your Credit Card
Not using your credit cards can impact your credit score negatively. Build credit by using your cards and paying them off regularly.
- Don't check your credit report
To ensure there are not any mistakes or fraudulent acts, it is important that you review your report regularly. You can access your credit report for free once a year from each of the three major credit bureaus.
- 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. Set up automatic payments to pay on-time.
- What to do if you fall for 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.
- Retail Store Credit Card Applications
Although applying for retail store cards may be tempting, they often have high rates of interest and fees. Before applying for retail store credit cards, think carefully.
- Not Understanding Your Interest Rates
Not understanding your interest rates can lead to unexpected fees and charges. Understand your interest rates by reading your credit card agreement.
Avoiding these credit mistakes, and improving your credit score can help you improve your financial standing. This will not only help you qualify to receive loans with better interest rates but also improve your financial health.
FAQs
What is the definition of a good credit rating?
700 is generally considered a good score.
How often should I review my credit report and score?
It is recommended that you review your credit history at least one time a 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?
It takes time to improve your credit score, but you can see the results in a few short months by paying off your debts and fixing errors on your report.
What should I be doing if I discover an error in 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.