With a low credit score, you might have some trouble applying for a loan. It can be a tough pill to swallow. There are many reasons why consumers will find themselves in this predicament and it is important to avoid them in the future. By averting these blunders, you can prevent future credit mistakes from happening.
Not creating a budget
Many consumers will not even think about creating a budget. Some will think it is a waste of time, but creating a concise budget can vastly improve the credit state that you are in. You never know what the future holds, so creating a budget even a month or two out can prepare you for an unexpected emergency. BankRate.com recommends tracking your expenses for a month and then creating a budget. Seeing your spending habits can help you determine what areas you need to decrease. This will let you concentrate on areas that need more attention.
Don't be late
Making a late payment to a credit card can be one of the most detrimental things you can do to your credit score. According to FICO, creditors organize late payments in several categories: 30-day, 60-days, 90-days, 120-days and 150-days late. There is also a charge off, which is an account that is written off because there are so many delinquencies. FICO said that a 30-day late payment can hurt a credit score as much as 110 points. Monitoring your credit card often can help you avoid this costly measure.
Cash for credit
A common mistake people make is treating credit like it is cash. Committing this error will hurt your credit. Many times, consumers will make small purchases with a credit card, without realizing that they can add up quickly. But those $5, $10 or even $20 insignificant charges begin to accumulate over time. You have to make monthly payments to your credit card, but the more you charge to a card, the greater debt you will see. A helpful hint is if you are making a purchase under $50 use cash or a debit card. Setting a spending limit for yourself can only help your cause.
Getting yourself into a credit hole can be a terrible ordeal and clawing your way back into a good credit standing can take awhile. If you avoid these costly mistakes, you will be able to see a vast amount of credit repair.