Avoid Common Credit Mistakes
Whether you’re trying to rebuild your credit after a personal bankruptcy filing, shore it up to qualify for a mortgage or car loan, or just aiming to make sure your credit is the best it can be, it’s important to take stock regularly of your credit practices and make sure you aren’t making any potentially detrimental mistakes.
So what are some common errors even the best-intentioned make when trying to establish a strong credit profile? A recent post from InvestInternals.com mentions these:
- Closing old credit accounts: One factor that affects your credit score is the age of credit accounts. Older is better. But some people who have stumbled with credit in the past (for example, run up serious credit card debt and worked hard to pay it off) attempt to eliminate temptation by closing old accounts. This essentially eliminates any proof that you have a history as a credit user and thus makes you seem like a bad credit risk to potential lenders. Instead, focus on paying down your debt and then keep accounts open, even if you have to leave your credit cards at home to keep yourself from getting back into debt.
- Missing payments & paying late: While most people understand that paying bills on time is an important part of maintaining strong credit, some people don’t realize how detrimental it can be to a credit score to miss a payment or be seriously late on one. To make sure you don’t accidentally fall behind, set up a system for yourself, whether that means keeping all bills in one place, paying bills online, creating a budget, or setting aside a regular time each month to take care of bills.
- Running high balances: Another factor that influences your credit score is the ratio of available credit to credit used. Using no more than 10 percent of your available credit is considered ideal for maintaining a strong credit score. That means that if you currently have high balances on one or more of your credit cards, it’s time to pay them down and focus on keeping them low.
- Avoiding credit: Again, the temptation for those who have overextended themselves on credit in the past may be to eliminate credit from their lives entirely. But doing this will result in your having—literally—no credit history at all. This can make it difficult (if not impossible) to get a loan for a car or house and even, in some cases, to get hired for a new job. Credit does not have to equal debt. To establish yourself as a good credit risk, open a credit card and use it only for minor purchases, paying the bill in full each month.
Similar Posts:
- Easy Steps That Let You Improve Your Credit Score
- The Five Things About You That Contribute To Your Credit Score
- Credit Score Q&A: Paying Credit Card Balances in Full vs. Minimum Payments
- 10 foolish reasons for not paying credit card bills on time!
- Credit Score – 10 avoidable to keep your eyes on!
