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. Understanding the most common credit errors to avoid, and how to correct them, is therefore essential. This article will provide tips and tricks on how to fix the most common credit errors.
- Why You Should Never Check Your Credit Report
You should review your credit report on a regular basis to make sure there are no mistakes or fraudulent activities. Each of the major credit bureaus will provide you with your free credit report once a calendar year.
- The Problem of a Co-Signer Without a Plan
Being a co-signer without a plan can put you in a difficult financial situation. Before co-signing a loan, have a plan in place for how you'll handle payments if the primary borrower defaults.
- Do not Pay Attention to Transfers of Balance
Balance transfers may be an effective tool to consolidate your debts but they also can have high fees and interest rates. You should pay attention to any terms associated with a balance transfer offer.
- Have Too Many Credit Cards
Too many credit card accounts can lead to missed payments and overspending. You should limit the number of your credit cards to manageable numbers.
- Not Using Your Credit Cards
Not using your credit cards can impact your credit score negatively. To build credit, use your cards frequently and pay them in full.
- Not Understanding Your Interest Rates
Understanding your interest rates is important to avoid unexpected charges. To understand your interest rate, read your credit card contract carefully.
- Loans with Cosigners
When someone defaults on a loan that you cosigned, your credit score can be negatively affected. Consider carefully whether you want to cosign for someone.
- Maximum Credit Card Limits
The impact of maxing out credit cards on your credit rating can be significant. Keep your credit utilization rate below 30% of your total credit limit.
- Closing Old Credit Card Accounts
Closing a credit card account that is older than 3 years can have a negative impact on your credit score. Keep old accounts open to increase the length of your credit history.
- Late Payments
It is common to pay your bills late, which can affect your credit score. Late payments may remain on your report for seven years. Set up automatic payments to pay on-time.
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. This can help you to get loans at better interest and improve your financial status.
Frequently Asked Question
What is considered a good score for credit?
700 is generally considered a good score.
How often do I need to check my credit score?
At least once a calendar year, you should review your credit report.
Paying off a loan before the due date can hurt your credit score.
Paying off your loan early will actually improve your score. This is because it reduces your credit utilization and shows lenders that you are responsible when using 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 be done if there is an error on my 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.