When it comes to maintaining a good credit score, there are a lot of factors that can impact your score. In fact, simply having poor or limited credit won’t directly impact your score — the main factor here is how you manage and respond to your current credit situation. The things that will have the most effect on your score are the way you approach various financial responsibilities. That’s why it’s so important to understand what kind of impact these things will have on your credit score. If you make any of these common mistakes, it could be detrimental to your financial well-being in the future. Here are four mistakes you should avoid if you want great credit.
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Late Payments
If you’re dealing with late payments, you’re probably aware that this can affect your credit score. That’s because late payments (even small ones) will be recorded on your credit report — and that will negatively impact your credit score. You’ll have to take action as soon as you realize that you’ve missed a payment. If you have a large amount of debt, you’ll likely have to create a payment plan with the company you owe. In some cases, simply paying the late payment will be enough to get the payment reported as “on time” and off your credit report. However, this won’t always happen. The best way to deal with this situation is to take care of the late payment as soon as possible.
Credit Card Debt
Having a revolving line of credit that you use and don’t pay off on a regular basis will have a detrimental effect on your credit score. As soon as you open a credit card, you’re given a certain amount of credit based on a number of factors. One of those factors is your credit score. If you continually use that credit card but don’t pay it off on time, it will negatively impact your score. However, if you pay off your credit card bill on time, you can minimize the effect that the credit card debt will have on your score. You’ll need to have a plan in place to pay off the credit card debt as quickly as possible. You’ll have to be extremely careful with this, since even a small amount of debt can have a major effect on your credit score.
Too Many Applications
Applying for credit is a normal part of life — even if you have an excellent credit score. However, if you apply for credit too frequently, it can negatively impact your score. In most cases, if you apply for a new line of credit (such as a credit card), the company will report that to the credit bureaus. Your credit score will drop by a few points because of this — but only for a short period of time. However, if you apply for multiple credit cards or other lines of credit, it can have a major effect on your credit score. The way that the credit bureaus report this information is by adding a “hard inquiry” to your credit report. That inquiry will stay on your credit report for two years — which is why you should be very careful about how many times you apply for credit. It’s best to only apply for new lines of credit when you really need them.
Incorrect Information
There’s one thing that nobody expects to happen — having incorrect information on their credit report. Most of the time, you’ll never know when incorrect information has been added. In most cases, the credit bureaus will alert you if they find incorrect information. However, if you find that there’s incorrect information on your credit report, it’s important to act fast. You have the right to dispute incorrect information on your credit report. If you find that there’s incorrect information on your report, you need to act quickly — as the longer you wait, the harder it will be to get it removed. If you find that there’s incorrect information on your report, you need to contact the credit bureaus and file a dispute. The best way to do this is to scribble down the incorrect information and then write a letter that describes the error and provides proof that it’s incorrect.
Conclusion
While your credit score is important, it’s also possible to have excellent credit and still not be able to get a loan. The best way to ensure that you have great credit is to pay your bills on time and keep your credit card balances low. Depending on your current credit situation, you may be able to improve your credit score just by paying off your existing debt. In some cases, you may be able to raise your credit score if you have bad credit. For example, you can try taking out a secured credit card, which will require you to make a security deposit and promise to repay the full amount.
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