A stellar credit score not only makes you jolly, but it can also save you loads of money in interest. A few common mistakes here and there can lower your credit score. You ought to be patient when building your credit into something you can be proud of every time. It will make you a suitable client among the landlord, automobile shops as well as getting a loan from the bank, among other places. Here are costly mistakes that you ought to avoid at all costs.
- Maxing out on credit cards
Did you know that maxing out on one or more credit scores an ultimately lower your credit? Almost 30% of one's credit score comes from the credit card utilization rate.
Therefore, if all the cards get maxed out, your credit score might suffer even when you keep up with payments. Rather than buying or charging more and more, it would be best if you paid down the credit cards with extra fees.
- Practicing credit card arbitrage
Here's a costly game that can adversely damage your credit score if you are too careful. You ought to shy away from this practice unless you are financially stable and have an idea of what's going on.
A misstep would mean your credit score gets quickly demolished within no time.
- Failure to check on a credit report
If you have a questionable credit history or no credit history, the best move forward is getting a credit card for no credit. You can visit here for more info on how to use a credit card to build a distinguished history. Now that that's out of the way, you should fall into the trap of not checking your credit report.
Most individuals assume everything is well and good whenever their credit is exceptional. You ought to be vigilant as there are times when wrong things can appear in your report. You ought to check your credit report every so often to ensure that everything is fine.
- Late payments
Any late payment tends to affect your credit score. The payment history is one of the most critical items within the credit score formula. Did you know that late payments can stay on your credit report for up to seven years?
However, there's some good news tied to this. As the late payment continues to age, it will affect the score less and less. A late payment that occurred more recently can harm your score more when compared to a late fee that happened four years ago, ceteris paribus.
The late payment amount also matters a lot, as well as the length of the payment.
- Closing accounts
It often sounds counter-intuitive to close an account; however, closing accounts can harm your score.
In the first instance, closing a credit revolving line such as a credit card, it can lower the credit card utilization. Second, closing your older credit card accounts also affects your credit score. It’s because FICO will consider the oldest accounts’ age.
It's easy to make mistakes with a credit card. You can visit here for more info on the credit system and all it entails. Keep tabs on your credit score, make timely payments, and, most importantly, be responsible with all your finances.