These 3 Moves Could Sabotage Your Efforts to Build Credit

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Don’t make these mistakes if you’re looking to improve your credit score.


Key points

  • Building credit requires you to take on debt in order to show that you are capable of using it responsibly.
  • This often means taking out a credit card and other loans.
  • Unfortunately, you could make mistakes in your borrowings that actually lower your credit score.

One of the trickiest parts of getting a good credit rating is that you usually have to convince a lender to give you a chance to borrow in order to show that you can do so responsibly. This first lender must try their luck with you, despite the fact that you do not already have a strong credit history.

Still, it’s possible to get approved for loans and credit cards even if your score isn’t perfect. And once you do, you can start building the kind of case that earns you a favorable score and opens all sorts of financial doors. You will, however, need to avoid making mistakes in the process.

In particular, here are three mistakes you could end up making that will sabotage your efforts to improve your credit score through responsible borrowing behavior. You will want to avoid them all.

1. Maximize your credit cards

Overcharging your credit cards is one of the biggest mistakes you could make if you’re trying to get a good credit score. Indeed, the credit utilization rate is an important factor in the scoring system – and it refers to the amount of credit used compared to what is available to you.

To avoid damaging your credit, you don’t want to use more than 30% of your lines of credit, at most – otherwise lenders tend to think you aren’t responsible for your debts. Ideally, using even less is better. That’s why it’s so important not to max out your credit cards. If you charge near or above the credit limit, your credit score will drop significantly.

2. Make a late payment

On-time payments are even more important when it comes to establishing credit. It’s easy to make a mistake and miss one, but unfortunately, if you’re 30 days late or more and your late is reported to the credit bureaus, it could seriously hurt your credit score.

You’ll want to be sure to avoid this huge mistake, so set yourself a calendar reminder or consider signing up for automatic payments to make sure you’re never late sending a payment to your creditors.

3. Open too many accounts at once

It’s good to have a mix of different types of credit accounts. You want to have several different types of debt on your file to get the best possible score. But you don’t want to jump into claiming a lot of credits all at once too quickly.

Each time you open a new credit account, the lender will check your credit and an “inquiry” will go on your report for two years. Too many inquiries result in a lower score. And each new account also reduces the age of your credit history, which is also a factor in your score. A longer history translates to a higher score.

Thus, you need to be slow and steady when it comes to opening accounts to avoid hurting your efforts to improve your score. If you open new accounts gradually over time, don’t overuse your credit, and never miss a payment, you should be well on your way to building a credit history that will make your financial life much easier. in the long term.

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