If you’re trying to build your credit score, you might be wondering whether you’re making any crucial mistakes.
Building a solid credit score can get you into your dream house or car and it can help to lower the monthly payments you make on all purchases.
Question is … are you making any disastrous mistakes when it comes to your credit? Keep reading to find out.
Mistake #1: Keeping a High Balance
Let’s be honest … maintaining high debt can really hurt your score, especially if your credit card is maxed out.
The three major credit bureaus (Experian, Transunion and Equifax) look at your credit usage factor, and they will penalize you for using too much of your credit.
What to do instead: Increase your income and work on paying down paying down your balances to less than 30% of your available credit limit. Stay with it, and you will soon see your credit scores rise.
Mistake #2: Missed or Late Payments
Skipping a bill payment or paying late can drastically hurt your score, and it will show lenders you are not trustworthy.
If you don’t show your ability to handle your current financial responsibilities, the three credit bureaus will likely lower your score.
What to do instead: Pay your bills on time. Set up a monthly auto-payment of the minimum amount so you’ll never miss a bill. Then you can always revisit your bill later in the month and pay more.
Mistake #3: Closing a Credit Card Account
Canceling an unneeded credit card may be tempting, but it could come back to hurt you, especially if the account showed a positive payment history.
What to do instead: Don’t cancel unused accounts. While you may not like seeing them on your report, they could be helping to raise your score. Instead, leave the card open and simply store it in a file or cut it with a pair of scissors.
Mistake #4: Not Having a Good Mix of Credit Accounts
Having several of the same type of credit can hurt your score. Lenders are more likely to frown if you have all credit cards and nothing else.
Banks like to see you’re able to handle a wide variety of accounts, such as car or home installments, service (utilities) credit and rotating credit.
What to do instead: Boost your credit score by diversifying the type of credit you borrow. If you have only credit cards, aim to add personal, car or home loans to the mix.
You may be making several crucial mistakes with your credit, including keeping high balances, paying late, closing unused credit card accounts and not having a good mix of accounts. However, if you pay down your balances, never miss payments, keep your accounts open and maintain a good mix of credit, you’ll see your credit score increase over time. If you want more expert tips on raising your credit score, or need some professional one-on-one help, schedule a free consultation and we’d be happy to help.