Your credit score and the information on your credit report are used by potential lenders to get an idea of how you’ve handled credit up until now and whether they’re willing to loan money to you. It can also be used by potential landlords, employers, insurance companies, and cell phone companies. Since your credit can be used in so many different ways, it’s important to take care of your credit and avoid common credit mistakes.
A single missed payment can drive down your credit score and can remain on your credit report for seven years. A missed payment can also trigger a late charge and possibly an increased interest rate. Paying late out of carelessness is a big mistake. To protect your credit, consider setting up payments to be paid through automatic transfer. If you don’t want to pay automatically, sign up for alerts that a bill is about to be due or add reminders to your phone.
Taking on Too Much New Credit
You may get several credit card offers in the mail and the incentives they offer can be appealing. Be careful not to apply for too many credit cards because too many inquiries in a short period of time can have a negative impact on your credit score. If you’re tempted to use the credit that’s available to you, you may reach a point where it’s a struggle to make monthly payments.
Paying Only the Minimum Payment
The minimum payment on a credit card statement is the lowest amount you can pay in order to remain in good standing. If that’s all you pay each month, remember that you’re being charged interest on any balance you carry. The less you pay toward the total amount owed, the longer it will take to pay the balance off, and the more you’ll pay in interest.
Closing Accounts You’re Not Using
Don’t be in a rush to close credit card accounts that you’re not using. Closing these accounts reduces the amount of credit that’s available to you. This brings down your credit utilization ratio and can also lower the average age of your accounts. Both are factors that go into calculating your credit score.
Not Reading the Fine Print
Whether you apply for a credit card or a personal loan, it’s important to understand the terms you’re agreeing to. If you sign up for a credit card that has a zero percent interest rate for several months, pay attention to what the interest rate will be when the promotional period has passed. Make sure you understand whether there are any fees, such as an annual fee.
Not Paying Attention to Your Credit Report
It’s a mistake to not pay attention to your credit report and assume that what’s being reported is accurate. Mistakes on credit reports are surprisingly common. If you review your credit report and find errors, dispute them immediately. Partner with Dovly, an automated credit repair engine for help with disputing errors and to ensure your credit information is reporting correctly. Get in touch with Dovly today.