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. Understanding the most common credit errors to avoid, and how to correct them, is therefore essential. This article will 9 the most common mistakes in credit and give practical tips to correct them.
- Not Having a Budget
Not having a budget can lead to overspending and late payments. Avoid this mistake by creating a budget.
- Refusal to Pay Back Loans
Delay in repaying a loan will have a negative impact on your credit report. Reach out to your lender to discuss repayment options if you're struggling to make payments.
- Credit Repair Scams: Beware!
Credit repair scams might be tempting, however they are often expensive and produce little to nothing. Avoid these scams if you work with reputable agencies to repair your credit or improve your credit score.
- Don't Build an Emergency Fund
Not having an emergency fund can lead to missed payments and damaged credit. This mistake can be avoided by creating an emergency funds.
- You can't get too much credit at once
If you apply for many lines of credit at once, it can damage your credit score. Space out your credit applications to avoid this mistake.
- Maximum Credit Card Limits
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.
- Being a Co-Signer Without a Plan
You can find yourself in a tough financial situation if you are a cosigner with no plan. Have a plan for handling payments in the event that the primary borrower defaults before co-signing.
- Have Too Many Credit Cards
Having too many cards can lead you to overspend or miss payments. Keep your credit card accounts to a manageable number.
- Avoid Using 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.
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.
Frequently Asked Question
What is an excellent credit score?
700 is generally considered a good score.
How often can I check my credit rating?
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 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?
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 do if I find an error on my credit report?
You can dispute an error you find on your credit file by contacting the credit bureau responsible for the error, as well the lender who supplied the incorrect information.