Certain decisions can quickly turn your credit upside down, and many consumers may not realize what happened until it’s too late. Some common credit mistakes that are made often include:
Applying for too much credit
Applying for too much credit can cost you in a couple different ways. The more credit card accounts and loans that you open, the more opportunity you give yourself to get deep into debt. But whether or not you’re approved for everything you apply for, bear in mind that these hard inquiries will have a negative effect on your credit score. It’s minimal, but if you’re applying for multiple loans and credit cards all around the same time, you may get turned down for them all. Instead, find just one credit card or loan that suits your current financial needs, while keeping future goals in mind (i.e. establishing credit, building up your score, etc.) Look through the terms and conditions carefully before you apply to learn about the interest rate, penalty fees, and so on. You’ll also want to learn about the acceptance criteria so that you can know if you’re eligible, rather than wasting an inquiry on something that you’ll likely not get approved for. Only apply for that one credit card or loan and take it from there. And whether you get accepted for approved, wait a while before applying for anything else.
Not pulling your credit report on a routine basis
Many consumers don’t look at their credit reports on a routine basis. They may review their credit scores now and then, if that—or just pull their credit reports when they’re about to apply for a large loan. However, it’s imperative to check your credit report on a regular basis just to see where you stand and to make sure everything is okay. You may discover accounts that have defaulted that you didn’t even know about, or that you simply forgot about. Catching these problems quickly and when they first post to your credit report can help stop them from escalating into something more serious. If you very rarely check your credit report, you may discover delinquent accounts once it’s already too late. Creditors may already be in the process of pursuing a judgment against you, which can result in wage garnishment and other serious consequences.
Another important part of checking your credit report often is to check for errors. Many credit reports contain mistakes, and if you catch one soon after it’s posted, you can take action by investigating the issue and disputing it. But if an error has been on your credit report for a long time, a lot of damage can already be done. Your credit score may have drastically gone down because of this negative mark on your credit report, and as a result, you may have been getting turned down when applying for loans and credit cards.
Not meeting payment deadlines
If you’re late with your credit card and loan payments, even by just a few days, you can be hurting your credit score. Additionally, you could be paying extra as a result, depending on your creditor’s terms and conditions. Late payments can subject you to increased interest rates, penalty fees, and other consequences. And when you fall very behind on your payments, you face more serious consequences. Your account can be turned over to debt collectors, your wages can be garnished, and your credit score can go down significantly.