Credit score maintenance requires careful money management and attention to detail. Despite this, even the most responsible consumers make mistakes that negatively affect their scores. Knowing what these mistakes are can help you avoid them and avoid further damage to your score. These mistakes can range from small to major, but they can have a major impact on your score.
Closing old credit cards that you are no longer using can also hurt your credit score. Closing these cards will raise your total credit utilization rate, which will negatively affect your score. On the other hand, keeping old credit cards open can help improve your score. It is also beneficial to keep old cards open and avoid closing them.
Carrying a balance on your credit cards is another mistake that can lower your score. Despite popular belief, carrying a balance costs you money and increases your credit utilization ratio, which can actually hurt your score. You should also pay off your credit cards before the end of your monthly statement cycle to avoid dinging your credit score.
Avoid opening new credit accounts. While you may be in the market for a new cell phone, you should avoid opening a new credit card for six months. Instead, you should focus on reestablishing your credit score and making sure you pay all of your bills on time. This should save you a considerable amount of money in the long run, and it should be more important to you than a temporary hit to your credit score.
Always remember that the utilization of your credit cards makes up a large portion of your credit score, so it is important to keep your balances below 30% of their limits. Maxing out your cards also indicates to creditors that you may experience payment problems in the future. Therefore, credit experts recommend that you never use more than 30% of your credit limit at one time.
If you find a mistake on your credit report, the first step is to contact the credit bureau immediately to dispute it. As long as you have the proper documentation, you should be able to get the error removed for free. However, remember to follow up in writing to ensure that the mistake is corrected.
Another mistake people make is not making payments on time. This can lead to disastrous consequences to their credit scores. Missing even one payment can lower your score by almost 100 points. Remember that late payments will remain on your credit report for seven years, and they will lower your score by a significant amount. If you tend to forget about payments, set reminders so that you don’t fall behind.
Another mistake many consumers make is having too many credit cards. Having too many credit cards will create a bad credit mix, which will lower your score. Lenders will look at your credit mix as a significant factor in determining your credit score. As such, it is best to avoid opening new lines of credit if you are trying to raise your credit score.