Top Four Credit History Blunders
You canít turn around without someone telling you this or that about the importance of your credit score. Unfortunately, theyíre all correct. You credit score has the power to help you get a small loan for your business, or a mortgage for a house, but only if youíve managed your finances in such a way that your credit score is favorable. So you want to do everything in your power to keep your financial record clean. Many different factors go into your credit score, but these are some of the biggest mistakes you wonít want to take to the bank. Donít max out your credit card.
Easier said than done, you might say, but itís essential. If youíre using the majority of your available limit on any given card, or on more than one card, it tells banks and lenders that youíre living off of your credit cards, and unlikely to be able to pay them back. Ideally, you should never carry more than 30% of your available limit on any credit card. Donít make late payments. Again, easier said than done, but promptness counts big on your credit score.
Not only can late payment allow your credit card company to jack up your APR and slap you with penalty fees, but it also puts your financial responsibility in question. Future lenders donít want to take a gamble on someone who has a history of missing payments. Keep on top of your payments, and you will be establishing yourself as a financially responsible person who they will feel confident lending to when it matters. Donít give up on your credit score. People sometimes think that once theyíve missed a payment on their credit card, their credit score is already toast, so they may as well just keep missing them, or worse, not pay them back at all. They couldnít be more wrong. When it comes to late payments, the details matter. People who will be evaluating your credit care how frequently your payments were late, and how long you let them go. Missing a payment by two days once is different from missing it by two days every month, and missing your payment by a week is different from not paying it for two months. And even if you have a blemish like this on your credit history, all hope isnít lost.
If you can practice good money-management for an extended period of time after your payment hiccup, lenders will look more favorably on you. They care the most about the last two years, so donít mope around thinking that a missed payment from a decade ago is going to lose you your mortgage. Donít use a card that doesnít report to the credit bureaus. Many people donít realize it, but not all lenders report to the institutions tallying up your credit score. You might think this would be a good thingóafter all, if they arenít reporting, any bad behavior with this card wonít be factored into your credit score, right? Wrong. Even though these cards wonít report any card practices that would work in your favor, any problems that go to collections will work against you. This is the worst of both worlds. These credit cards can harm your credit score, but they will never improve it, not matter how responsibly you use it. Whenever you sign up for a new credit card, read the fine print and find out whether or not your lender reports to the credit bureaus. If you arenít sure, simply ask one of the lenderís employees.
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