We all want to have a high credit score but there are some common mistakes that could ruin your credit score. The one thing you need to know is that in order to get a good credit score, it takes time and patience. There are no quick fixes that you can do overnight to get a higher score. But steer clear of the following mistakes that could have a devastating affect on your score.
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Closing Credit Cards
One of the factors in your credit score is your credit history. Some people think that it is a good idea to close credit cards that they have payed off and no longer use. Don’t do it! If you have had a credit card for a long time you want to keep it open. This shows lenders that you have experience paying off your credit.
Keep any cards that don’t have a yearly fee. The longer you have a card, the better impact it has on your credit score. You can keep the card active by using it once or twice a year for small purchases.
Never Checking your Credit Report
Some people don’t care about checking their credit score, but you really should. You don’t want to be applying for a home or car loan and then realize your credit score is very low. You need to know what it is so that you can start fixing any problems that may exist.
Over 70% of credit reports had some errors. You can dispute any errors with the credit agencies so that it can be taken care of and no longer be on your history. You should be checking your report at least once or twice a year. This will even help detect identity theft.
You can get a free credit report from Credit Sesame. It is 100% free, you don’t even enter your credit card so there is no way that they can charge you later. They will even give you suggestions on ways you can improve your credit score.
High Utilization Ratio
In order to help improve your credit score, you want to make sure that your utilization ratio is less than 30%. This means that you want the percentage of the credit you have available to the credit you are actually using to be low.
For example, if you have a credit limit of $1,000 on a credit card, you should only be using $300 of the available credit at one time. You want to keep your balances as low as possible.
Late Payments
This is pretty well known but worth repeating: not paying your bills on time really hurts your credit score. Being late once or twice will not ruin your score but if you make it a habit of paying your bills late, your credit score could plummet.
Ideally you will want to pay off the full balance, but always pay at least the minimum amount due. If your credit card company offers it, sign up for email and text alerts when your bill is due, right it down in a calendar, or even sign up for automatic bill payments if that is what will work for you.
Staying Away from Credit Cards
I know that some people don’t like to use credit cards and prefer to pay cash. This is a great way to be responsible with money but it is not good for a credit history.
In this day and age you really need a credit history. You will want to buy a home, car, college education, etc. and to take out a loan for those, you need a good credit score.
I think that everyone should sign up for one credit card that they can use anywhere when they are college aged. As long as you are responsible and only use it for emergencies or pay it off every single month.
This will help you establish credit, which can take a while to do. The sooner you can do that the better.
What are some tips you have or lessons you learned that may have ruined your credit or that of someone you know?
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