Credit scores are often a deciding factor in our lives. They can mean the difference between being approved for loans, getting our dream apartment and having to settle for less desirable ones, or even being considered as a candidate for certain jobs. Determining how to correct and avoid common credit mistakes is essential. This article will highlight the 10 most common credit mistakes as well as provide practical tips for how to deal with them.
- Don't 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.
- What to do if you are a co-signer without a plan
A co-signer who does not have a plan in place can land you in a bad financial situation. You should have a plan to handle the payments in case the primary borrower fails.
- Don't Build an Emergency Fund
A lack of an emergency fund may lead to missed payments or damaged credit. Create an emergency fund and avoid this mistake.
- Not Using Your Credit Cards
Your credit score may be negatively impacted if you don't use your credit cards. To build credit, use your cards frequently and pay them in full.
- The Benefits of Credit Cards
Credit cards usually come with rewards or benefits. You can get the most value from your credit card by taking advantage of these rewards.
- Neglecting Your Credit Score
Ignoring your credit score can be detrimental. Regularly checking your score will help you to identify improvement areas and track your progress.
- Credit Repair Scams to Avoid
Credit repair scams are tempting, but often they come with high fees for little or no results. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
- Applying for too Much Credit All at Once
If you apply for many lines of credit at once, it can damage your credit score. Avoid this mistake by spreading out your credit application.
- Cosigning Loans
You can lose your credit score by cosigning for someone else if they default. Consider carefully whether you want to cosign for someone.
- Defaulting on Loans
A default on a loan could have a serious impact on your score. Reach out to your lender to discuss repayment options if you're struggling to make payments.
You can improve your financial situation by avoiding common credit mistakes. This can help you to get loans at better interest and improve your financial status.
Frequently Asked Question
What is a high credit score?
700 is generally considered a good score.
How often should I review my credit report and score?
At least once a calendar year, you should review your credit report.
Can repaying a loan earlier hurt my credit?
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?
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 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.