We hear a lot about the importance of having great credit, however how typically do we put in the time to comprehend the habits that affect our credit ratingscredit history? Sure, all of us know that if we charge up a storm and do not pay our expenses, our credit ratingscredit rating will get dented. But here are 3 other methods you may be destroying your credit without even understanding it.
1. Paying your costs late
Failing to pay your costs on time is one of the quickest methods to destroy your credit. The good folks at Credit.com report that a payment thats 90 days or more unpaid will substantially harm your credit scorecredit report for up to 7 years. It doesn’t matter if youre late paying a $20 bill or a $200 bill. When your tardiness is recorded, itll stay with you for a long time, so if you believe being late on a small bill wont matter in the long run, believe againreconsider. In addition, while late payments that do not reach the 90-day mark aren’t quite as bad for your credit, a series of 30-day late payments can be a black mark on your record also.
Assuming theres no cash flow issue at play, the easiest way to prevent being late is to establish automated costs payments through your individual billers, your credit card business, or your bank. Not having the cashthe cash to pay your bills on time is a different story entirely, at which point you ought to sit down, examine your spending habits, and make some major cuts till your monetary situation improves. While you cant precisely avoid paying lease or purchasing groceries, you technically don’t require cable or Internet service.
2. Failing to inspect your credit report
ManyA lot of us do not bother to check our credit reports, however heres a good factorneed to be more proactive: 20% of credit reports consist of errors, according to a 2013 Federal Trade Commission research study. If yours is among them, you might wind up paying higher interest than required for a mortgage or househome mortgage. Imagine youre applyingrequesting a $20,000, five-year auto loan and are authorized for 6% interest because of your supposedly poor credit. At that rate, your loan will cost you $387 monthly, or $23,200 over the life of the loan. Snag a 3% rate rather, and your monthly payment will be just $360 a month, or $21,600 over the life of the loan. In our scenario, youd lose $1,600 by not finding and correcting a credit report mistake.
By law, youre entitled to a complimentary copy of your credit report every 12 months from each of the 3 major bureaus, TransUnion, Experian, and Equifax. If you haven’t read your own credit report this year, stop exactly what youre doing, get a copy, and study it for errors. An hour or 2or more of legwork to clear up a mistake could conserve you thousands of dollars down the line.