4 Credit Mistakes You Should Always Avoid: It doesn’t matter whether you’re trying to improve your credit or build a positive credit history from scratch; there are a few financial moves you should always avoid.
Even one small misstep can result in lasting damage, undoing all the hard work you’ve already achieved.
Take a look at four of the most important credit mistakes and how you can prevent them from hurting your own credit report.
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Credit Mistakes: 4 Credit Mistakes You Should Always Avoid
1. Late Payment
Making late payment is one of the credit mistakes you should always avoid.
The largest factor determining your credit score in your payment history, making it extremely important to avoid paying any of your bills late.
Obviously, this includes any type of financing payment, like credit cards, student loans, mortgage, car loans and any other kind of personal loan, but even things like your cell phone bills or utility payment have the potential to impact your credit report if you leave them unpaid for too long.
Your creditor can of course charge late payments according to your user agreement, so it always smart to pay by the due date.
If you do happen to miss that, you have 30 days until the late payment can be reported to the credit bureaus. Once a negative item like that appears on your report, it can stay there for several years.
2. Credit Limit
Reaching the credit limit is another credit mistake you should always avoid. Another credit mistake to avoid fixing credit or building it is to balance your credit utilization.
How much you utilize each line of credit available to you also has a major impact on your credit health.
For instance, mocking out $8,000 on a single credit card is generally more harmful to your credit than spreading that same amount over multiple cards.
This is because your finances seem more precarious if you don’t have much of an emergency buffer through your various lines of credit.
A quick credit repair tactic is to either pay down you’ve maxed out cards or ask for a credit limit extension.
If you take that route, just make sure you don’t actually use the extra room on your card.
3. Closing Accounts For The Wrong Reasons
Closing account for the wrong reasons is also one of the credit mistakes you should always avoid. When you have problems with accumulating credit card debt, your immediate reaction may be to shut down your accounts.
But that can actually hurt you instead of helping to improve your credit card now: first, your average account age is part of the calculation determining your credit score.
When you close a credit card, the card eventually drops off your credit report and lowers the length of your credit history.
Secondly, when you close one line of credit that automatically increases your overall credit utilization if you still have outstanding balances on other accounts. When is it a good idea to close an account?.
4. Applying For Multiple Credit Cards Or Loan At Once
Every time you apply for any type of financing, you’ll see a new inquiry appear on your credit report.
Some lenders or credit card companies start off the pre-approval process with a “soft check” which doesn’t hurt your credit repairs effort.
But once you fill out a formal application, they’ll usually perform a hard check. These inquire stay on your credit report for two years and can damage your credit for one year.
Even though the drops are usually just minor, several inquiries can really start to add up. If you want to fix your credit, pay attention to how many hard pulls are being done.
The Four credit card mistakes you should always avoid have been listed above. Late payment is one of the credit card mistakes you should always avoid because is the largest factor determining your credit score in your payment history.
The second credit mistakes you should also avoid is credit Limit, You should avoid credit limit because of it nice to balance your credit utilization.
The third credit mistakes you should always avoid are closing the account for the wrong reason.
This should be avoided because when you close a credit card, the card eventually drops off your credit report and lowers the length of your credit history.
The Fourth credit mistakes you should always avoid is to apply for multiple credit card or loan at once which is very bad.