Think your credit score doesn’t matter? Guess again.
Your credit score is the first thing people will check when you apply for a loan, a line of credit, an apartment or house, and sometimes even a job.
Many people don’t realize that simple credit card mistakes can damage your credit and make you lose out on great opportunities.
Don’t let your credit score negatively affect your life — whether that means missing out on your dream job or the lowest interest rates when refinancing student loans.
Avoid these seven most common credit mistakes and protect your financial future for years to come.
1. Applying for Store Credit Cards
It can be tempting to fill out that little application form to save X% on your purchase in the store that day. In fact, you might assume taking advantage of these savings are a good financial habit.
But did you know that just by applying, you are opening a line of inquiry on your credit that could negatively affect your score?
The more “hard inquiries” on your credit, particularly within a six- to 12-month window, the more you damage your score.
Don’t apply for a credit card until you need it and you know with a good degree of certainty that you’ll be approved. And for the record, no one needs a credit card to a department store.
2. Cosigning for a Loan
Let’s be blunt: co-signing on a loan is a bad idea.
We understand. You’re trying to help your child, aunt, cousin, or best friend from childhood.
But if they fail to make a payment, you’re stuck footing the bill, and you have no recourse in court. They can continue living in their house, driving their car, or enjoying the fruits of the loan, while you’re left struggling with the payments.
And if you refuse to make payments, you’ll damage your credit score — just as much as you would if you took out that loan yourself.
3. Making Late Payments
Late credit payments are one of the worst ways you can damage your credit score.
Your on-time payment percentage plays a big role in your credit score. Late payments negatively affect that portion of your credit history and make you look like an unreliable borrower.
Do everything in your power to make the minimum credit payments every month. Ideally, you should pay more than the minimum, but at the very least, make sure your minimum payments are always on time. Set up an auto-payment system to ensure you don’t accidentally overlook a bill.
4. Closing credit accounts
You finally paid off that credit card debt that’s been holding you back from financial freedom. Awesome! If your knee-jerk reaction after paying that last statement is to cut up the card, hold on just a minute.
Did you know that closing your credit card accounts can hurt your credit score? Closing your account will lower your available credit; if you have any other outstanding debt, such as another credit card, a car loan, or student loans, your debt-to-credit ratio will increase — bad news for your score.
As tempting as it is to say goodbye to that card forever, it’s in your best interest to keep the account open.
Note: You can still physically cut up the card. Just keep the account technically open, on paper.
5. Opening Credit Accounts
As ridiculous as it seems, opening lines of credit can be just as damaging to your credit score as closing lines of credit.
Don’t accept every offer that comes through the mail. Don’t refinance your loans or home mortgage unless you can save a serious amount of money by doing so. And don’t open lines of credit you don’t need.
Having too many new accounts within a short period of time harms your credit in two ways. First, it shortens your “average account age” – negating the positive effects of having older accounts. Second, you’ll show hard inquiries on your account, which also negatively affects your credit score.
Immediately trash any credit offers that come through the mail. You can even permanently opt out of receiving credit offers through the mail.
6. Not Checking Your Score
Ignoring your credit score can inadvertently damage it. Inaccuracies and fraud can leave your score lower than it should be. If you aren’t aware of these inaccuracies, you won’t be able to take steps to fix them.
You need to look at your score once a year to make sure that your score accurately reflects your credit history. If you spot an erroneous information, file a report with the credit bureau that lists the wrong data.
7. Sharing Your Credit Card Information
Scam artists and career criminals have creative tactics for retrieving your information and stealing your money. One legitimate-sounding phone call could make you lose your financial identity to criminals. Unless you have fraud protection, you could be on the hook for thousands of dollars.
Don’t let criminals lower your score by stealing your identity. Don’t ever give your bank account number, routing number, or access codes over the phone. Check your credit card statements to make sure you can verify all charges. If you spot something suspicious, report it immediately and place a fraud alert on your credit report.
Protect your score for years to come
Don’t let common mistakes be the reason that you have a low score and potentially miss great opportunities. Keep on top of your credit, avoid these mistakes, and make sure that you protect your credit score for years to come.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|