Despite the noticeable improvement in the economy and the continuous decrease in the unemployment rate in the U.S., many individuals still face economic and financial challenges.
According to some reports that emanated from the U.S. courts in 2016, there were over a million cases of chapter 7 and chapter 13 bankruptcy filings.
Financial difficulty isn’t limited to your finances alone. It affects everything about you including your long-term credit health. This can have a negating effect on your credit and will remain on your credit report for several years.
Some people have had their credit score severely affected simply because they filed for bankruptcy or due to some other reason. However, having a damaged credit is not the end. There are techniques you can use to fix it and reduce the pressure on your head.
In trying to repair your credit, you must be careful because you may end up doing more harm than good.
Here are seven common credit mistakes that could end up negatively affect your credit even further.
1. Ignoring of your Credit Reports
At least one in every five customers had an error on at least one of their credit reports a study on credit reports in the US confirms. These errors are a homing beacon of disaster for credit scores.
Checking and reviewing free copies of your credit reports and score frequently will put you in the driver’s seat when it comes to understanding credit and obtaining the best terms for yourself.
2. Not Having Budgets
This point is significant because every credit repair starts with budgeting. Having a budget entails fine-tuning your needs and expenditure with your financial resources. Also, endeavor to create a balance between paying those bills on time and your saving habits.
If you fail to make a budget, you will cause more ruin to credit over time, and this may get to the point where salvaging the situation may seem insurmountable.
3. Having or Applying for Too Many Credit Accounts
While opening a new credit plays a vital part in credit score, having or applying for too many accounts may just be an error that will hurt your already bad score even more.
When you apply for credit, there is an inquiry into your file. Too many inquiries can drop your score and may be seen as a risky behavior. So, keeping a rather small number of credit accounts would be a great step to consolidating on your credit score.
4. Filing Bankruptcy
When you file for bankruptcy, it remains on your score for up to seven years. Within this time, you will encounter challenges in getting credit cards and loans.
Most lenders before granting you a loan ask questions relating to possible claims of bankruptcy in the past. An affirmative statement to such questions could prevent you from getting such a loan. So, repairing your credit and filing for bankruptcy are incompatible.
5. Cancelling Old Credit Accounts
When it comes to credit scoring, age is rather a virtue. A lot of folks do not know how unwise it is to close an old or unused account when trying to fix credit issues.
Closing old accounts increase your credit utilization ratio, and this might be detrimental to your already bad credit score.
Do yourself a favor; keep that old reputable credit account active.
6. Hiring a Company to Repair your Credit
This act will not produce any good results, to be honest with you. The Federal Trade Commission made it clear that there is not a single legitimate credit repair company.
7. Not Trying to Repair your Credit At All
After seven years, most negative information will be removed from your credit report so some folks may look to put off any repairs of their bad credit. However, seven years is a long time to live with a bad credit.
Conclusively, making efforts to fix a bad credit can be challenging but what is more depressing is having your credit score made worse by any or all of these common mistakes.
Be shrewd about your decisions and avoid these mistakes!