9 Credit Mistakes That Could Cost You Money
May 01, 2024
Your credit history plays a big role in your financial life. Not only does it weigh heavily in determining the loan terms and interest rates you’re offered, but it can also impact other parts of your life, such as whether you get a job, an apartment or even a security clearance.
When it comes to credit, you may unknowingly be making the following mistakes that could cost you money:
1. Occasionally making late payments: Late payments can stay on your credit report for up to seven years. Payment history factors into how much credit and what interest rates are offered.
2. Closing an account because it has a zero balance: This applies to revolving credit like credit cards. Closing a zero-balance account hurts length of credit history established for that account and hurts your credit utilization ratio.
3. Making only the minimum monthly payment: The Consumer Financial Protection Bureau points out that carrying a higher balance from month to month means you are paying more interest on those higher amounts, costing you more money than if you paid off the balance in full.
4. Not asking for late-payment forgiveness: You may not know this, but most lenders will reverse a late fee and the negative mark on your credit that accompanies it! It isn’t a rule that they will forgive you, but according to The Motley Fool, it never hurts to ask!
5. Taking a loan offer without comparing it to other offers: This has to do with the amount of interest you will pay over the term of the loan. Even a small difference in interest rates can save you money!
6. Not checking your free annual credit reports: You are entitled to receive free credit reports from the three major reporting agencies annually. Take that opportunity to look for mistakes in reporting and dispute any errors that can hurt your score, causing an increase in interest rates.
7. Maxing out your credit card balances: This mistake can hurt you in a couple of ways. Carrying high balances impacts your debt-to-income ratio, affecting your ability to open new lines of credit. High balances also result in more interest paid on those balances.
8. Not reviewing your bank and credit card statements: Review your bank account and credit card statements for errors and fraudulent charges that could cost you money and hurt your credit score.
9. Misunderstanding introductory credit card offers: Introductory rates are used to attract consumers. If you don’t know that the introductory interest rate is only for a limited time, you could needlessly be spending more on monthly interest than you had anticipated.
So remember, your credit health is a cornerstone of your financial well-being, affecting everything from loan terms to job opportunities. By avoiding credit mistakes like late payments, you can take control of your financial destiny. Stay informed, stay proactive and watch your credit soar!
This article may reference and link to third party information that has been verified to the best of our abilities. There is no guarantee of accuracy. Heartland Bank does not endorse companies, services, or products referenced in its articles and is not responsible for the content, links, privacy, or security policies of these third parties. Information in the above article may include material from Equifax (https://www.equifax.com/personal/education/personal-finance/articles/-/learn/credit-mistakes-costing-you-money/), Experian (https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/), the Consumer Financial Protection Bureau (https://www.consumerfinance.gov/about-us/blog/credit-mistakes-could-be-costing-you-money/), the Motley Fool (https://www.fool.com/credit-cards/2018/06/27/4-common-credit-mistakes-that-could-cost-you-money.aspx), and AnnualCreditReport.com (https://www.annualcreditreport.com/index.action).