So you wonder why your credit score is lower than it was last month. You care about your credit and you have been saving money for more than a year for a down payment. Your family is growing and you just need more room in the house, not to mention that the 4-door sedan is just not roomy enough. Got your eye on that SUV you passed this week on your way to work. Then you take that step and apply for a loan to find that your credit score were not what you were expecting and even if you qualify for a loan, it is at a much higher interest rate. What did you do wrong? Let’s take a look at 5 credit mistakes to avoid.
- Missing a bill payment.
Want your credit score to bungee jump? Just miss a payment on your bill and pay 30 days or more late. That will absolutely do it. Since your credit score is an indicator to future lenders of how well you pay your bills and how likely you are to pay timely, your on-time payment history is very important. A late payment can, in many cases, delay you in qualifying for a home loan or have other lenders decline to offer you their lowest rates.
You may want to set up auto-draft payments the day after payday so that you don’t overdraft your account later in the month after your checking account balance may be lower.
2. Applying for too much credit.
Applying for a lot of credit may have a negative impact on your scores. Many times when we go in a retail store, they offer us incentives to apply for their high interest store card and receive a discount or other item. If you apply, make sure the value you are receiving is valuable to you because each time you apply for new credit, the potential creditor may runs an inquiry on your credit and thus lowers your score. Frequent applications for new credit can also indicate to future lenders that you are desperate for new credit or not able to qualify for the credit you need. Avoid having too many hard credit inquiries and applications. Instead, have a good relationship with your current creditors and ask about getting a credit line increase.
3. Maxing out your credit cards.
Maxing out your credit card not only puts you in debt and can be a budget killer, but it also indicates to lenders that you are struggling financially. Lenders see it as you may be at a higher risk for defaulting on your account. Instead, try to keep your running balance under 20%. This will increase instead of lower your credit score. To pay down your cards, stop using them and begin to make multiple payments each month. Work on paying off the cards with the highest interest rate first.
4. Not using your cards.
You may feel that not using the cards are the most responsible thing to do. That is not usually the case. Running a low balance is usually more likely to increase your score. We recommend that you use your card for items that you would normally purchase. Lenders are grading you on your responsibility to pay and having the funds to pay. Always pay at least a few more dollars than the minimum payment instead of just paying the minimum. Many credit card lenders will close your account if it goes inactive over a prolonged period of time, thus damaging your score.
5. Not paying that medical bill.
You went to the doctor, they filed your insurance and you paid your co-payment. That took care of everything. Well, maybe not. Millions of people get medical bills turned over to collections and never received an invoice from their medical provider. If this happens to you, contact the debt collector within the first 30 days of receiving the letter. If you know that you owe the money and just didn’t pay, then pay it. If you feel that you don’t owe it or are not sure, write a letter to the collector and mail via certified. Be sure to keep a copy of the letter. Per the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act, they have to prove the debt before they can place it on your credit reports with the credit reporting agencies. Once they have proved the debt…..if they do….then work out suitable payment arrangements with the collector so they will not place it on your credit reports. Keep good notes of anyone that you speak to including date and time. It’s best NOT to call them and only communicate in writing so that you do not have a conflict on what is being said.
Want to stop a debt collector from calling? Call ReScore Solutions. We may be able to stop those calls.
If you are still experiencing problems or not comfortable handling this, please give us a call at 205-352-3448. We specialize in helping people with abusive 3rd-party debt collections.