The credit market sure has changed a lot over the last several years. It was not too long ago that you didn’t need to do much more than show up in a mortgage lender’s office, tell them how much you wanted to borrow and have them cut you a check. Verifiable income and good credit seemed to matter very little in the cheap credit era.
We’ve come to learn that this is certainly not the case. Lenders have gotten much smarter about who they choose to loan money to. They’ve also gotten stingier. Not everybody qualifies for a loan with a low rate any more. Borrowers need a rock solid credit rating to get their foot in the door.
Many have taken the steps necessary to improve their credit score but too many are still making basic mistakes that will prevent them from ever sniffing a top flight credit rating. If you want to get to that upper level, here are five mistakes you’ll want to make sure you avoid at all costs.
Make Your Payments Late
One of the biggest pieces of the credit score puzzle is the timeliness of your payments. Start missing the due date and your score will start dropping fast. Most lenders will give you up to a 30 day window to pay up to account for genuine mistakes but go beyond that and you’ll probably get reported to the credit agencies.
…or Don’t Pay Your Bills At All
Toss those bills into the sewer grate as Homer Simpson would do and you might as well flush your credit rating down there with it. One thing worth noting is that if you’re experiencing genuine financial difficulties, don’t just ignore your bills on the grounds that you can’t pay them. Contact the company and ask them if they have any type of payment relief or financial assistance programs available to you. At worst, they’ll work with you to see what can be done and understand that you’re willing to pay your debt.
Sign Up For A Lot Of Cards
Fill up your wallet with a bunch of cards and the credit agencies are going to think that something is amiss. A low credit used to credit available ratio is generally a good thing for your credit rating but opening up several new card accounts to increase your available credit is not the way to go about it.
Cancelling Those Unused Cards
This one is a bit counterintuitive. Getting rid of all those cards you never use should be a good thing, right? Look at the paragraph above. A low credit used to credit available ratio is good but closing out unused cards makes that ratio go up since your available credit is going down. That will negatively affect your credit score.
Declare Bankruptcy
This one is not counterintuitive at all. Declare bankruptcy and your credit rating will take years to recover and likely won’t ever make it back to where it was. Mortgages will be very difficult to obtain as will almost any conventional type of credit.
A good credit score is more vital now than it has been in years. Avoid the easy mistakes and rein in spending and you’ll soon find your credit score climbing.
Photo credit: kevansunderland
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