credit issues

7 Common Credit Issues and What to Do to Fix Them

You make every payment on time, and you don’t have a large amount of debt.

So, you probably assume you are free of credit issues, so that must mean your credit score is in the excellent range, right? 

You would be surprised how many people follow that same sediment. However, there are some common mistakes that people make that they don’t even realize can affect their credit score. 

In this post, we are going to explore some of the most common credit mistakes and how to solve them.

1. High Credit Card Balance

Credit report companies asses how much credit you are using in relation to your credit limit. The credit used and the credit balance is one of the significant determining factors on your credit report. 

For instance, if your credit card limit is $1000 and you spend $900, then you’re spending 90% of your credit. A good rule of thumb is to keep your credit card balance at least 50%, and if you’re attentive, keep it at 30% and under.

Keeping your credit card balance low helps credit agencies know that you are responsible with your credit. In turn, this may help improve your credit score. 

2. Late on Your Payments

One or two late payments often won’t affect your credit score unless you have a young credit history, or you only have one item on your credit report.

However, if you have multiple missed or late payments, it can affect your credit score for a few years. Late or missed payments often stay on your credit report for 6-7 years.

Once a late payment is on your credit report, the only way to remove it is through time and demonstrating the ability to make payments on time. Over a few years, the late payments will eventually be removed from your credit report.

To ensure you don’t miss a payment again, try automating your bills and making sure your bank account information is up to date. It’s easy to miss a few bills if you aren’t diligent. 

3. Collections on Your Credit Report

Unpaid collections can end up on your credit report, which will impact your credit score. Parking tickets, fines, medical bills, and cell phone bills can all be sent to collections if left unpaid. 

The good news is before you pay your collections, you can speak with a creditor and ask them to remove the collection notice from your credit report after you agree to pay. In many cases, creditors are understanding and will remove the collection notice from your credit report.

Before you make a payment, you want to ensure you get an agreement for the removal of your collection notice in writing from your creditor. Once you’ve paid your collection, be sure to reach out to a creditor to ensure it is removed from your credit report.

If a collection notice is the only reason for your low credit score, you can expect your score to go back up.

4. Closing Old Credit Credit Card Accounts

It seems like common sense to close an account once you’ve finished paying it off or if you decide you no longer need it. However, this is one of the quickest ways to lower your credit score.

Essentially, closing a credit card minimizes the amount of credit you have available. If you have a balance on another account, this will increase your credit utilization.

Credit utilization, your total debt owed compared to the amount of credit you have available, is one of the major factors on your credit score. As mentioned, the best rule of thumb is to keep your credit card balance at 30% or under. 

Before you decide to close your account, you want to assess the pros and cons. In many cases, leaving your card open doesn’t cost anything. Be sure to talk to your issuers to determine if there are any yearly or monthly fees associated with your card.

5. Identity Theft

Identity theft can happen to anyone, so it’s important to know what to do in case it happens to you. It occurs when someone uses your personal information such as your social security number, bank information, or name to commit fraudulent acts.

An identity thief can use your personal information to take out loans, get credit cards, or other factors that can contribute to your debt; this can impact your credit in the long run.

The best ways to combat identity theft is to follow these key tips:

  • Keep an eye on your credit report for any suspicious activity.
  • Don’t give out your social security number if it isn’t necessary or if you’re suspicious.
  • Put a freeze on your account if you suspect suspicious activity.
  • Place a fraud alert on your credit.

6. Opening Retail Cards to Save Money

Most shoppers look for ways to find discounts. Many retailers understand this, so they typically offer store credit cards that offer a percentage off of your entire purchase every time you use your store credit card.

While this may seem like a great deal at first glance, it usually promotes overspending which can lead to even more debt. Lenders take note when one person opens too many credit cards 

Instead of opening up new retail cards, try shopping only during sales or search for coupons online.

7. Never Checking Your Credit Report

You would be surprised how many people never check their credit score. It is more important than ever before to check your credit report, mainly to check for credit inaccuracies or find ways to improve your score.

The main credit reporting bureaus at Experian, TransUnion, and Equifax. Be sure to check them to identify any errors in your credit report. If you do spot an error, you can always dispute it.

If you would like to view your credit score, there are many online credit report websites where you can to get an authorized credit report at no cost.

Say Goodbye to Your Credit Issues

It may seem like learning how to fix your credit issues is a tedious process. But staying informed on the best ways to improve your credit is beneficial in the long run. 

To learn more about credit repair, check out our latest blog.

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