Last week we discussed how Your Credit Score Can Be Ruined Even If You Don’t Do Anything Wrong. This week we’ll be addressing The 10 Most Common Credit Score Mistakes.
What is a Credit Score? According to the Office of Consumer Affairs (OCA) “Your credit score is a judgment about your financial health, at a specific time. It indicates the risk you represent for lenders, compared with other consumers. Unfortunately, there is not an online Canadian credit score calculator tool.
There are many ways to work out credit scores. The credit reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender. Lenders may also have their own ways of arriving at credit scores. In addition, lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay”.
What are the 10 Most Common Credit Score Mistakes?
1. Failing to check your credit report for errors: As we discussed in last week’s blog Your Credit Score Can Be Ruined Even If You Don’t Do Anything Wrong. Check your credit report at least annually. Mistakes on credit reports are more common than you may have imagined and you need to stay on top of the situation. If you do discover any errors, contact the credit bureau as soon as possible to correct the situation.
2. Not using your full legal name in financial documents: It’s possible that people with common names or similar sounding names could have their name attributed to a credit report that is not theirs, as was the case for Mr. Dave Johnson of Pembroke, Ontario. Use your full legal name on bank accounts, credit applications and other documents that become part of your credit history.
3. Paying your bills late and failing to make at least the minimum monthly payment: If you don’t pay at least the minimum amount due on time your creditors will eventually report your account as past due, which can damage your credit score. If there is a reason why you won’t be able to pay your bill on time, contact your creditor before your bill is due to work out an arrangement if possible.
4. Maxing out on your credit cards: If your credit cards are maxed out, potential creditors may question your ability to repay. If you are approved for a loan you may be charged a higher interest rate to compensate for what is viewed as a higher risk.
5. Not alerting creditors if you’ve moved: Your bill may arrive late and as a result your payments could be late, potentially damaging your credit score.
6. Registering for too many new credit cards: Consumers who often open new credit cards are viewed as a greater risk than those who don’t.
7. Closing older credit card accounts: Closing older credit card accounts shortens the length of your credit history and this can adversely affect your credit score.
8. Don’t co-sign for someone else’s loan: You could be liable for that person’s debt and damage your credit rating.
9. Don’t share your credit card or social insurance number with anyone: There are a lot of scams abound where people try by phone, email or mail to get your credit card or social insurance number. This can be a fast track to identity theft and financial disaster.
10. Ignoring the warning signs of credit problems: If you have trouble making the minimum payments on time and have maxed out all of your credit, you have serious debt problems.
Serious debt problems need professional help. Contact Ira Smith Trustee & Receiver Inc. and take the first step towards a healthy financial future. Starting Over, Starting Now a debt free life can be yours.