How To Find And Improve Your Credit Mistakes
It is not easy to have a good credit score. Financial mistakes can happen for a variety of reasons. It can be challenging for a consumer of credit to act smartly and distinguish between what is a mistake and what is right. Below we have listed some of the common credit mistakes that you may make while taking financial decisions.
Co-signing is one major mistake that most people make. By co-signing for a credit obligation, you are taking equal responsibility for the debt just like the primary borrower. Whether you have co-signed for a loan or a credit card, it will find its way onto your credit file right after the account is opened. To avoid making such credit mistakes you should never guarantee payments on a credit card or loan for which the primary borrower is unable to qualify for. If you are still willing to guarantee payments then you should set aside funds beforehand to make the payments. When co-signing you should understand that you are as liable as the primary borrower.
Fixing the damage caused to your credit due to co-singing is not easy. If the co-obligor is unable to pay off the debt or refinance the debt out of your name, then you can either make the payments yourself or convince the co-obligor to pay off the debt by selling of the asset or consider bankruptcy.
Closing Credit Cards
It may sound unlikely but closing a credit card can cause potential damage to your credit scores. The age of the account will never affect your credit once it is closed, but it will have negative impact based on how much of the available credit limit you have used up by closing the unused account. When calculating your credit score, special consideration is paid to this ratio. When an unused credit card is closed you lose the value of the limit of the unused credit. Such ratio is calculated by dividing the aggregate debt on credit card by the aggregate credit limits available on the open credit card accounts.
To fix this issue you can request the credit card issuer to reopen the account even if you may have closed the account by mistake or by choice. If the card issuer refuses to reopen the account, you can choose to pay off the remaining balances. But if you are unable to afford you can request the credit issuer to increase the limit of your card.
Retail Store Credit Cards
New account should be opened only when you are really in need of it. Opening a retail store credit card just because you will get 15% off on your transactions can be a grave mistake. Such retail cards can drive your credit scores down due to new credit inquiry and credit limitation on retail cards. Such retail store cards usually charges high interest rates and offer low limits. Therefore, it will be easy for you to over utilize the card and when the debt-to-limit ratio goes up, your credit scores will fall.
If you have already opened a retail store credit card, do not rush to close it. Closing the account will not remove the account from your credit report or help you to avoid the impact of the inquiry. To fix it you should keep the card paid off every month in full. Revolving the balance every month will surely damage your score.
Any responsible consumer concerned about credit report should know how to resolve the issues with credit report and understand what happens when you file a dispute. To find if there is any error on your credit report you can start with by requesting for a credit report. Check if you have been denied credit, loans, insurance, or change in credit limit in the past three months. If you find any recent acts in your credit file that you do not recognize then you should request for a free copy of your file.
Review your credit report regularly to make sure all information in your credit report is accurate, all credit accounts are listed and payment history, balances and age of the account is correct for each creditor. Check if there is any negative information on my report. Inaccurate information can affect your credit score. If you find any such information or income or incorrect details then notify the credit-reporting agency.