Three Mistakes to Avoid When Repairing Your Credit

creditrepairmistakes

Everything you do that involves credit becomes part of your credit history. One simple mistake can make your credit score decrease quickly.  Bad credit makes many things difficult, impossible, or more expensive. It can keep you from buying a home, financing your education, and even from getting a job. This is why it's so important to build good credit. To get rid of the negative credit report information, you’ll have to prove that you can handle credit responsibly.  

In rebuilding your credit you can avoid bad credit by simply making the right choices with credit and other financial accounts. Just avoid these 3 mistakes that consumers often make when rebuilding credit.

Not Checking and Knowing Your Credit Score

According to a 2015 Chase Slate Credit Survey, 39 percent of Americans don’t know their current score. Before you ever begin repairing your credit, you should check your credit report. The credit reports lists all the credit accounts you have incurred. 

A 2013 Federal Trade Commission study revealed that one in five consumers had an error on at least one of their credit reports — and these errors can seriously affect your credit score. When rebuilding your credit, it's important to order your credit reports and look for errors. Correcting those error could provide an immediate boost to your credit score. [We can help with that]

Making Late Payments

When rebuilding your credit score, your principal job is to make your monthly payments on time. Missing just one payment can cost you dearly. If you have excellent credit and missed 30 or more days on one account, expect your credit to fall by 100 points.  This mistake will stay on your credit report for seven years, too.

Lenders look up to your credit score to assess if you are a reliable borrower who will repay debts on time. That’s how important timely payments can be - just one or two late payments could have a extreme effect on your score and can keep you from getting another loan. Remember, your on-time payment percentage could make or break your score.

So don't forget to send in that credit card payment on time. Set up a calendar reminder. You can also set up auto-pay with all of your creditors to avoid any mistake someday.


Canceling credit card accounts

Many people tend to cancel their credit cards after they have paid them off to avoid future problems. Not so fast. This financial misstep has a negative impact to your credit score. Closing a credit card can be bad for your credit score, especially if it’s a credit card with a balance or one of your older credit cards. 

Two important factors in your credit score are your utilization rate and the average age of your credit accounts. The goal is to have a low utilization rate and a long credit history, but both of those numbers are affected when you close out cards.

Instead of cancelling your credit card account, Keep that card open, just make sure to avoid running up its balance again. You’ll never improve your credit score by closing a credit card, so think twice about canceling one.

Takeaway

Your credit report will help you figure out what items you need to focus on to improve your credit.  Get familiar with your credit report to know if your credit could use improvement. Your credit card habits are one key indicator of your overall financial health. If you are trying to raise your credit score, be sure not to make one of the above mistakes that could, unintentionally, damage your score.