5 Common Credit Mistakes and How to Avoid Them
Your credit score is one of the most powerful financial tools you have. But many people unknowingly make mistakes that can damage their score. Let’s break down five common credit mistakes and simple ways to avoid them:
1. Missing Payments
Why It’s a Problem:
Payment history makes up 35% of your credit score. A single missed payment can stay on your report for up to seven years!
How to Avoid It:
- Set up automatic payments or reminders.
- If you miss a payment, pay it as soon as possible—30 days late is worse than a few days late.
2. Maxing Out Credit Cards
Why It’s a Problem:
High credit utilization (using more than 30% of your credit limit) signals financial strain to lenders, hurting your score.
How to Avoid It:
- Keep your balances below 30% of your limit, ideally under 10%.
- Pay down balances before the statement date, not just the due date.
3. Applying for Too Much Credit at Once
Why It’s a Problem:
Every hard inquiry lowers your score slightly and too many in a short period can make you look desperate for credit.
How to Avoid It:
- Research lenders to target approvals, so you don’t waste inquiries.
- Space out applications by at least six months.
4. Closing Old Accounts
Why It’s a Problem:
The age of your credit accounts affects 15% of your score. Closing an old account shortens your credit history.
How to Avoid It:
- Keep old accounts open, even if you don’t use them.
- Use the card occasionally for small purchases to keep it active.
5. Ignoring Your Credit Report
Why It’s a Problem:
Errors or fraud can drag your score down, and you might not even know it.
How to Avoid It:
- Check your credit report regularly at AnnualCreditReport.com.
- Dispute inaccuracies right away.
By avoiding these common mistakes, you’ll keep your credit score healthy and open doors to better financial opportunities. Remember: small, consistent steps lead to big credit wins!
Want to dive deeper into improving your credit? Check out our eBooks and tools for step-by-step guidance!