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This post is sponsored byLexington Law, thank you for supporting brands who support TCM. As always, all thoughts, opinions, experiences, and advice are my own.
How important is your credit score really? It's a topic we've tackled here on the blog before (read here). It's the first thing most will pull when you're applying for a lease or mortgage, a loan or new line of credit, and sometimes even a job! Yes, people check your credit score, even when you don't plan on taking out a new line of credit. It has become more and more synonymous with showcasing how trustworthy you are. Which is why it's so important to keep yours in good standing and avoid these credit mistakes.
I know how tempting it is for most people to close that pesky credit card youfinally paid off. But resist the urge! Closing your credit card can impact your credit score negatively. If it's your oldest account, it'll lower the age of your credit history. Closing a card will also lower the amount of available credit to you, which can raise your credit utilization ratio. You can still ceremoniously cut up your old credit card to resist the urge of using it, but leave it open on paper. Although there are some occasions you will want to close your credit card, read about 4 of them from Lexington Law here.
I know this sounds pretty obvious – why would you ever share your personal information?! But, scam artists have gotten more clever over the years, so be extra cautious you aren't falling prey. Always check the “from” email address (not just the name that appears) and ask questions/push back on phone calls.
When you co-sign for a loan, you are essentially marrying the line of credit. So while you may not be using whatever you're cosigning for, it's still attached to you. Meaning if the person you're cosigning for messes up, you'll be on the financial hook or your credit score will also get messed up. I saw the toll this took on my clients all too often back when I was a substance abuse counselor. People would cosign for a car or apartment, only for their child or significant other to leave them with the financial responsibility. If you have cosigning regrets, check out this article from Lexington Law to see your options.
Late payments are one of the biggest reasons credit scores go in the toilet. Depending on if you have excellent or good credit, a late payment could drop you as much as 100 points (it's weighted by range). Your minimum balance across all your lines of credits should be a fixed cost in your budget. Set up auto-pay if you're nervous. Aside from pesky late fees, if you're more than 60 days late, your credit card issuer may even up your interest rate! So make sure you are on top of this.
Every time you apply for a line of credit, it acts as a hard inquiry on your credit score which will negatively impact it. Before applying to open an account, make sure you meet all the minimum requirements for approval. Also resist the urge to open store credit cards! It's easy to get caught up in the big discounts, but all those hard inquiries will drop your score. Plus, store credit cards often have really high interest rates and can be easy for most people to forget about when it comes time to pay off. Think of store credit cards as an impulsive night out that you'll likely regret for months to come.
Each month you want to review your monthly billing statement in detail to catch any mistakes. You'll also want to regularly check your credit score. When you get in the habit of regularly checking your score you can catch any errors and quickly rectify them. Inaccuracies and fraud happen more than you think on your credit report. You want to check your credit score from each of the bureaus annually too. If you aren't into checking everything regularly consider using the Lex OnTrack Identity Theft Protection tool to help you monitor and protect your identity from theft with $1 million in identity theft insurance. The Lex OnTrack tool can help you catch fraud on your accounts and will work with you to quickly rectify the situation.
This is a risky move and a big credit mistake in most cases. While sometimes we all need a little help in a pinch, this is a surefire way to get yourself in even hotter water. Cash advances charge higher than normal interest rates and there's no grace period. You'll end up owing even more money than before, and will likely be under even more pressure to pay it off.
I know, a lot of people are nervous to use credit cards. Many of you have written in saying you made so many credit mistakes and messed up your score so badly in your early twenties that you swore them off altogether! But here's the thing, when you use credit cards in a healthy way, they can easily help showcase your creditworthiness to others; which again you'll likely be assessed on whether or you are going to lease or buy a home and maybe even in your job!
This is when you've typically missed six months of a payment. It's one of the worst things that can happy to your credit since it stays with your for seven years. It drives your credit score down and is a red mark when people pull your credit. If you've experienced a charge off, Lexington Law can help. They've helped clients remove inaccurate, untimely, misleading or unverifiable (questionable) charge offs from their credit reports. Schedule your free consultation with the professionals atLexington Law here.
I'm a big fan of rewards credit cards – but also understand that they aren't the end all be all. Making smart financial choices is what really matters. Don't make the mistake of spending like crazy just to hit a point threshold for some extra airline miles or a bonus in points. Credit cards are not a game, and you don't want to overspend just to get some reward. It's like the guy who drops a hundred dollars at the carnival stand only to win the $5 teddy bear. Don't be that guy.
If you're only paying your minimum payment on all of your outstanding debts, you're actually racking up more debt with each passing month. Only you'll no longer just owe what you charged, now you're having to pay extra on interest and it becomes vicious cycle that you'll never get out of until you start paying more than the minimum payment. With that said, when you use a debt repayment strategy you will likely only pay extra on one debt at a time, so you would be only paying the minimum for a period (read more about debt repayment strategies here,).
As a general rule of thumb, it's great to keep your credit card balance at or below 30% of the available credit to you. This shows lenders and the bureaus you know how to manage your finances in a healthy way. If you do max out your credit card, it's important to look at your spending habits and make a change – otherwise you may end up right back in the same position. If you can't pay it off, consider calling your creditors and seeing if they will work with you. If you're passed that point, and your credit card bill has already been sent to collections, scheduled your free consultation with the professionals at Lexington Law here. They have helped clients repair their credit and specialize in helping people with bad, unfair, unsubstantiated, or inaccurate credit.
What credit mistakes have you experienced? How have you fixed them?
Afraid Of Credit Cards? 4 Reasons To Overcome It
9 Habits Of People With 800+ Credit Scores [How Do You Compare?]
How To Improve your Credit Score this Year
List of 12 Credit Mistakes To Stop Making
- Closing a credit card account
- Co-signing for a loan
- Making late payments
- Applying for store cards – and opening accounts in general
- Sharing your credit card information
- Not regularly checking
- Taking out a cash advance
- Not using credit cards
- Going point crazy!
- Only paying your minimum
- Getting a charge-off
- Maxing out your credit card
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