5 Fatal Mistakes We All Make That Drive Down Our Credit Scores
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
5 Common Mistakes That Can Harm Your Credit Score
Many people don't realize that even with a good track record, certain actions can negatively impact their credit score. Here are five key mistakes to avoid:
1. Paying Off Old Debts Before Closing on a Mortgage
If you're applying for a mortgage, hold off on settling old collections, judgments, or tax liens until closing. Paying these off beforehand can make your credit appear to have recent delinquent activity, which lowers your score. Always consult your mortgage lender about when to pay these debts.
2. Closing Credit Card Accounts Prematurely
Closing credit card accounts might temporarily decrease your score because it shows as new activity. While eliminating unnecessary accounts can eventually lead to an improved score by reducing potential credit risk, this process takes time. Aim to close accounts well before applying for any loans.
3. Maintaining High Credit Card Balances
Keep your credit card balances below 30% of your available credit. For instance, if your credit limit is $1,000, try to keep your balance under $300. Additionally, rather than transferring balances to cards with low introductory rates, focus on paying off debt, as frequent balance transfers can negatively affect your score.
4. Applying for Unnecessary Credit
Avoid opening new credit accounts for promotions, such as discounts at department stores. These new accounts can lower your score. It's better to maintain a healthy mix of credit types, including installment credits like car loans, alongside credit cards and mortgages.
5. Not Verifying Your Reports
Even if you settle a collection or close an account, don't assume it's reflected on all three credit bureaus. Agencies quickly report when you owe money but may be slow to update when you've paid. This is especially crucial if you've declared bankruptcy. Ensure all accounts, collections, and judgments are updated by contacting the bureaus directly with documentation.
Maintaining Accurate Credit Reports
It's your responsibility to ensure that all three credit bureaus have the most accurate and up-to-date information. You can write or file online disputes with each bureau, providing copies of paid receipts and related correspondence to keep your records precise and current.
---
Ron Cahalan, a mortgage lending industry veteran with 26 years of experience, reveals industry insights in his book, Lenders Are Liars. His work highlights ways to secure the best rates and negotiate lower closing costs, sharing essential knowledge for homeowners and borrowers.
You can find the original non-AI version of this article here: 5 Fatal Mistakes We All Make That Drive Down Our Credit Scores.
You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.