6 Credit Mistakes that Could Be Costing You Money
May 07th, 2019
When it comes to credit, you may be making mistakes that are costing you money in the long run. Avoid these six financial pitfalls.
It is essential to manage your credit even though it can seem like a lot of work. 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 are offered, but it can also impact other parts of your life, like whether you get a job, an apartment, or a security clearance. When it comes to credit, you may unknowingly be making mistakes that could cost you money in the long run.
Consider some of these common credit mistakes to make sure you avoid these financial pitfalls.
Credit mistake #1: Occasionally paying your bills late
It may not seem like a big deal to make a late payment here or there, but since your payment history is a main driver of your credit score, it could hurt your overall financial health. Make sure to pay your bills on-time, every time. Consider setting up automatic payments, or electronic reminders, to make sure your payments are on time.
Credit mistake #2: Making only the minimum payment each month
If possible, pay off your credit card bill in full each month. The higher the balance you carry from month to month, the more interest you pay, and that is money you could be using for other things, including paying off debt. Unless your financial situation leaves you no choice but to only pay the minimum, pay your entire balance each month or as much of the balance as you can, before the payment due date, to avoid or minimize interest charges.
Credit mistake #3: Taking a loan offer without comparing it to others
Shopping for credit is a great way to make sure you are getting the best possible offer. Better loan terms can save you money. Even a small difference between interest rate offers can mean major savings in the long run.
Credit mistake #4: Not getting your free annual credit reports
Your free credit reports give you a snapshot of your credit history, including your open lines of credit, whether you have made your payments on time, and the status of your credit accounts. You should review your credit reports regularly to make sure the information is correct. Errors on your credit reports can hurt your score. This could mean a higher interest rate and less money in your pocket - so it is important to check your credit reports and dispute any errors well before you apply for a loan. Each of the three major credit reporting companies gives you a free credit report every 12 months if you request it. You can request a copy from Equifax, TransUnion, and Experian at AnnualCreditReport.com.
Credit mistake #5: Not planning or discussing credit with loved ones
Sharing financial information and responsibility with your spouse is important for your joint financial well-being. Discuss credit goals so you can work towards them together. Individual financial decisions often affect family financial matters, so it is important to be on the same page. Learning about each other’s financial behaviors, debt levels, and spending habits can help minimize conflicts and confusion over financial decisions. Being prepared and well-informed will help you overcome any setbacks or unexpected financial crises that may arise.
Credit mistake #6: Not taking advantage of seeing your credit scores for free
Many financial companies have begun to offer free credit scores to their customers. Remember, you have more than one credit score. It is normal for your credit scores to vary based on the time it was calculated and the formula used. Checking your credit scores regularly helps to quickly identify any credit issues you may need to address and track how your financial decisions affect your scores.
Content courtesy of the Consumer Financial Protection Bureau. 2019.