The steps you need to take to improve your credit score aren’t terribly complex, but yet still many people make common mistakes that set them up for higher interest rates down the road. But just not making a few simple and common mistakes, you can save your hundreds or possibly even thousands of dollars in interest, not to mention make it easier to get loans in the future.
If you want to protect your credit score from dramatic drops, don’t make these simple mistakes:
Maxing Out Your Credit Cards – Even if you never go over the limit, having balances that go very close to limit of your credit cards can have a seriously negative effect on your credit score. Generally, you want to make sure that the balances on your credit cards are less than fifty percent of your total available credit. It is also important to remember that credit bureaus typically look at all of the accounts together rather than each account individually.
Paying Your Bills Late – This has the most negative effect on your credit score. What worries lenders more than anything else is the risk of default, and lenders believe that late payments are a big sign that you may default on your loans. As far as your credit report is concerned a late payment is defined as any bill that is reported as being 31 or more days late.
Having No Savings – Not having an “emergency fund” can hurt your credit because whenever disaster strikes, such as you when you need to make expensive repairs to your car or have unexpected medical expenses, you are forced to lean on your credit cards. You should tuck away at least $1000 into a savings account that you should only use as a last resort.
Buying a House Beyond Your Means – Everyone wants to live in a nice, spacious house. But if you don’t look at you r real financial situation before you leap into a nice home, it could spell disaster for your credit score and your future finances. And since home loans are so large and take so long to pay off, this is one error that is not easily correctable.