Here are the top 10 common credit mistakes that you need to avoid to boost your credit score and save you money in loan costs
1. Closing credit cards that you’ve had for a long time. How long you’ve had credit plays an important role in determining your credit standing. Creditors prefer borrowers who have a long record of credit history. Closing credit cards that you’ve had for a long time is a bad move since it will be like deleting a part of your credit history. If you think you own too many credit cards, consider which accounts to close and do not close the ones you’ve had for many years. If the problem is that your old credit cards come with high interest, you don’t have to use them on a regular basis. To prevent them from automatically closing, you may use them once every few months to buy an inexpensive item. This way, you can immediately pay the balance in full and avoid paying for interest.
2. Missing on your credit card payments. Your ability to pay and how responsible you are in paying your debts are all reflected in your credit report. Obviously, missed payments will put you in a bad light. Other creditors will deem you as a high-risk borrower and you will not have the privilege of obtaining better rates when you apply for loans.
3. Using your credit limit in full. If you are in the habit of frequently maxing out on your credit limit, you are putting you are badly damaging your credit reputation. Those who use their credit limit in full or exceed their allowable credit are regarded as high risk. Using up your credit is also a clear sign that you are spending more than what you can afford. Credit card holders must all be aware not to exceed 50% of their allowable credit.
4. Not regularly checking your credit report. Sadly, many consumers neglect the practice of checking their own credit report. However, being aware of your credit report is one way to protect your account from fraud, illegal charges and identity theft. It also helps you keep up with your due dates of payment to your different creditors. It is recommended to get a copy of your personal credit report at least once every six months.
5. Not understanding your rights as a consumer. The Fair Credit Reporting Act has established rules and regulations for all lenders to follow. Do not let a creditor take advantage of you. Know your rights as a borrower.
6. Not being aware of the three major credit bureaus. Most consumers do not know that the three major credit bureaus (Equifax, Experian, Transunion) work independently in creating credit reports. You may request a copy of your credit report from any of these bureaus and if you find some corrections, do not hesitate to inform the bureaus right away.
7. Not building credit. Not having any credit in your account is a mistake. Creditors are not the only ones who check on one’s credit history. Employers and landlords also use an individual’s credit history as a basis for accepting applications. Without a credit history and a credit score, you will be very limited in your dealings.
8. Owning too many credit cards. Contrary to what many believe, owning a lot of credit cards will not boost your credit score. It is how you handle your credit card accounts that matters. Owning two different credit cards should be enough as long as you can keep up with your payments.
9. Using your credit cards as debit cards. Although some credit cards double as debit cards, a high interest rate is immediately charged right after your cash advance is made.
10. Submitting too many credit card or loan applications. Some consumers send applications to credit card or loan companies just to free stuff. However, each time you submit a credit application to a lender, an inquiry will be made on your credit report. The number of inquiries and the creditors who inquired your credit will also be reflected in your report. Shopping for credit will lower your credit score especially if creditors decline your application.
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