Most people don’t give their credit scores a second thought until they need to make a big purchase. However, ignorance is never bliss when it comes to a person´s finances. As the score drops, doors can literally close, including employment opportunities, great insurance rates, and prime lending options. Here are some common mistakes and pitfalls that one should avoid. The advises are provided by MONEYBANKER, who specialises in personal loan and personal finance.
Avoid Credit Cards Completely
Avoiding credit cards helps to avoid dangerous debt, but it also doesn’t show creditors that one has the ability to resist temptation. The nice thing about credit cards is that one can build some credit without making long-term commitments or getting into serious debt. It is possible to sign up for one or two credit cards as long as one keep the balances low and pay them off quickly.
Close Cards Out
Another common mistake is to pay a card off and then close the account. This sends the message that the cardholder cannot control the spending habits and needs to have the company intervene. A better bet is to leave the accounts open with that available credit. The cardholder will show responsibility and ultimately boost the score.
Fail to Shop Around
There are plenty of companies offering credit, and they all have different rates, requirements, and benefits. Before one signs up for any card, see if it’s a good fit. Make sure to understand the potential fees, interest rate, and rewards programs. If one wants to use a rewards card that will be paid off every month, then look for one with a flexible points system. On the other hand, if one wants a card with a low interest rate he/she needs to carry a balance for any reason.
Unaware of Credit Score
It’s estimated that 39 percent of consumers are unaware of their credit score and whether it’s rising or falling with different decisions. However, knowing what the score is can spare a person from surprises when he/she goes to finance a car or get a mortgage. Even people who have years of credit and have always had a great score can see it drop drastically if they accrue too much debt or make other mistakes.
Cosign Loans
When having great credit, a person may have friends or family members to ask to cosign for loans so that they can build credit or get better interest rates. However, this puts a serious dent in the credit score. The person is responsible for that debt if the other party fails to pay, so the full amount of the loan will be figured in with that person´s debt ratios and credit score. Cosigning something today can prevent from getting the credit one needs in the future.
When knowing what mistakes to avoid, one can maintain a higher credit score. Even if having all the credit one thinks needed, the score can still have an impact on his/hers life. Employers and insurance companies alike may take a look at this number before making an offer. Keep the credit strong and the score high to ensure that more doors are open.
Source: MONEYBANKER
