Credit Mistakes You Need To Nip In The Bud Now
Sooner or later, everyone is going to need good credit. You’ll need it to buy a house, start a business, buy a car, or get good rates on another loan. Building a solid credit history and maintaining a high credit score can have a dramatic impact on your quality of life now and in the future when you’re considering applying for a loan or even a prepaid debit card. That said, all it takes is one mistake for you to get in trouble with your creditors, which could end up costing you more money. Here are just a few credit mistakes you really can’t afford to make.
Closing old credit card accounts
It must be such a relief to finally pay off a credit card and never have to think about it again. But you should really hold off closing the account altogether because this could actually lower your credit score. Even if you pay off a credit card, you’re usually better off keeping that card open.
Leaving your oldest accounts open helps increase your credit score and build good credit. After several years, the credit bureaus will eventually drop closed accounts from your credit report anyway.
The last thing you need is an unexpected increase in your monthly repayments, but that’s exactly what you’ll get if you make even one late payment. Late payments negatively affect that portion of your credit history and make you look like an unreliable borrower, so do everything you can to avoid making these credit mistakes.
If you’re paying back money to a lot of different creditors, repair.credit might recommend a consolidation loan so you can make manageable repayments to one single lender. Ideally, you should pay more than the minimum, but at the very least, make sure your minimum payments are always on time.
Not checking your score
It’s tempting to leave your credit score at the back of your mind, but the fact is you’re doing yourself a disservice by not keeping yourself informed. Your credit score can tell you which credit cards you qualify for, save you from loan rejection, or even just let you know how you could improve it.
Most importantly, not knowing your score could lead to inaccuracies and fraud, which could inadvertently cause more damage. You need to look at your score once a year to make sure that your score accurately reflects your credit history. If you spot an erroneous information, file a report with the credit bureau that lists the wrong data.
Avoiding credit cards
Credit mistakes can be scary and overwhelming, so you might be tempted to avoid credit cards altogether. Unfortunately, a lack of credit is worse than bad credit, because it prevents you from securing a mortgage or a car loan down the road. When used responsibly, credit cards give you a way to slowly build up your credit history without the need for large purchases. The more you know about credit cards, the more responsible you will be about using them.