Maintaining a good credit score can be tough, but the trick isn’t so much about what you can do to increase your score, but more about what you shouldn’t do to protect it from going down.
Whether you’re looking to qualify for a loan or want a smooth process when applying for a service (e.g. mobile phone plan), here’s a quick look at the most common money mistakes people make that end up hurting their credit.
Not Paying Your Bills on Time
Your history of punctuality (or lack thereof) when it comes to paying your bills time can greatly affect your credit score. While a few late payments on your loans, credit card bills, and other liabilities aren’t going to wreck your credit, when this becomes a habit, don’t be surprised if it will.
Co-signing Loans
Asking friends or family members to co-sign to a loan is a common practice. This can be harmless in most cases, however, if the person taking on the loan fails to pay on time or outright defaults, not only will you be liable for payments and penalties, your credit score will also take a hit.
Bottom line? Think long and hard when agreeing to co-sign to a loan, even if it’s with someone you trust.
Amassing Credit Cards
It’s easy to build a collection of credit cards when promos and tempting new offers come up practically every week. Even if you don’t use them, having too many credit accounts can cause your score to drop by a few points, first when a creditor makes an inquiry, second when you actually open the credit card account. When credit bureaus see multiple credit inquiries and accounts opened in a short period of time, you may be flagged as a credit risk.
Having Too Much Debt
If you’ve already maxed out on your existing credit card/s, creditors are likely to doubt your ability to repay any money they lend you. Owing anyone too much money at any point could also prompt a lender to bump up their interest rates for their own security.
Not Updating Your Billing Information
Frequently moving around and changing your address can make receiving and paying your bills on time a little more difficult. An obvious consequence of this is that you would end up paying your bills late, which lenders are not very fond of. As much as possible, keep your creditors up to date on any address and name changes to maintain an accurate credit report. Better yet, go paperless to eliminate this problem.
Leaving Your Credit Report Unchecked
Speaking of credit reports, most people tend to check their credit status when they have to make a rushed purchase, only to find out that they can’t qualify for a loan. If your credit report is inaccurate or is lacking information, you could suffer from increased borrowing costs and major delays.
Keeping Unpaid Loans Post-Divorce
Throughout the course of your marriage, you may have entered into a joint loan or two with your ex-spouse. Upon divorce, courts can rule to have your ex exclusively pay off those loans. This doesn’t get you off the hook, however, as those unpaid loans are still bound to end up on your credit report if your ex-fails to pay them on time.
Learn more about how to maintain a good credit score by scheduling a consultation with mortgage and credit expert Chris Lamm.