When we talk about credit mistakes, we tend to think about the obvious mistakes such as carrying a balance, or not paying our bills on time. Mistakes happen to all of us, including those of us who’re normally responsible with credit.
It’s unlikely we’re all of a sudden going to forget to pay our bills. There just happens to be a few things that we do intentionally or unintentionally that can directly affect our credit scores. When we’re used to having a solid credit history, we can get comfortable, and forget that one small thing could affect our credit negatively. These missteps won’t ruin us, but we should still make every effort to avoid them.
Not checking our credit report
It doesn’t matter how good your credit score is, you want to check your credit report for any signs of potential fraud. What you want to look out for is any suspicious activity such as a credit inquiry you didn’t make, or an address on file that you’ve never lived at – those are some pretty clear signs that your identity may have been compromised. Don’t assume that these are simply clerical errors, report them right away so the credit bureaus can start an investigation.
Cancelling old credit cards
Your credit history plays a role in determining your overall score so don’t cancel that credit card you’ve had since university quite yet. Many people believe that they need to use their credit cards on a regular basis for them to report to your credit history, but that’s simply not the case. As long as you’ve used the card in the past, the history will still be there so it’s worth keeping. Feel free to cut up the card, just don’t cancel it. That being said, if those unused cards have an annual fee, then you should totally cancel them.
There’s also your credit utilization ratio to consider. Let’s say you have two cards, each with a $10,000 limit. On one card you owe $5,000, but the other one you never use and has a balance of $0. Your current utilization rate is 25%, but once you cancel that unused card your utilization rate jumps up to 50%. In the eyes of lenders, that may not be favourable.
You take advantage of skip a payment options
Every so often – usually around the holidays – credit card companies will allow you to skip a payment. It may sound great in theory since you can delay payments for a month, but of course, it’ll cost you extra in the form of interest. Trust me, these kinds of offers are never free, so be sure to read the fine print/
It doesn’t matter if you’re deep in debt or have an incredibly high credit score, any of us can make mistakes. We can try to avoid them as best we can, but sometimes it’s a matter of admitting that our current situation is a mistake and we need to fix it. Making minimum payments technically doesn’t hurt our credit scores, but it also won’t get us out of debt. If you think you have a problem, try one of these debt repayment options.