Do you know your credit score? You should!
Your credit score is a number that reflects how likely you are to pay back money you borrow. There are a few different scales, but the most used is the FICO score from 300 to 850, with a higher number being more desirable. The score is based on a report that lenders can check before making their decisions.
The information on the report comes from various sources, including any lenders you may have borrowed from and any companies whose credit cards you have. Any bankruptcies or lawsuits for nonpayment you’ve been involved in will appear on your credit report too.
These 5 mistakes can ruin your credit. Don’t let them happen to you!
Not knowing your score. Your score lets lenders know if you’re a good candidate for a car or home loan. So it’s important to make sure your credit report is right. Be sure to request a copy of your report every year. And don’t worry—your requests for a report won’t show up if lenders check your credit.
Making late payments. Late payments are the fastest way to sink your credit rating. Lenders want to see that you pay bills on time, and even one missed payment can do a lot of damage. Whether you use an auto-pay program or reminder notes on your desk calendar, make sure you don’t miss a due date!
Only paying the minimum payment. Sure, you’re making regular payments. But only paying the minimum will hurt your credit score. Interest will build up on your balance, which will affect the amount of debt your credit score reflects. Pay down that balance as quickly as you can. A good rule for credit cards is never to charge more on your card than you can pay in full each month.
Applying for too many credit cards. Every time you fill out a new credit card application, that company checks your credit. This “hard inquiry” can be seen by other lenders. So if you’ve applied for a bunch of cards in a short period of time, this new debt can affect your chances of getting loans or other accounts.
Closing old credit card accounts. Your credit report shows card accounts you haven’t used in a while as inactive, or they may drop off your report entirely. This can make it look as though you don’t have much credit history. Rather than cut up that old card, use it at least once or twice a year and pay it off in full each time.
Building a history of responsible credit use will help you get better rates on car loans, home loans, and even insurance. Avoid these mistakes, check your credit report every year, and you’ll be on your way to getting the credit you deserve.
This article should not be considered legal, tax, or financial advice. You may wish to consult a tax or financial advisor about your individual financial situation.
