What most people don’t understand is that it doesn’t take long at all to ruin your credit score and it can be done in a few weeks or even a few days. The part that is even worse it that it will take a much longer time to repair the credit than it did to ruin it. Most mistakes will remain on your credit score for at least 7 years or more depending on the mistake. However, here are some decisions that you need to think through before making your final decision as they impact your score immensely.
Don’t get a credit card if you aren’t ready. This is one of the biggest mistakes that is made, and most people, especially young adults open the credit cards before they even understand how to budget, money in general or even have a steady income. All of these are prerequisites before getting a card and if you don’t understand them, then don’t get a card because it will be problematic.
Opening more cards than required. This is another one of the big mistakes because people think they need to keep up with their friends or family, which means buying more and bigger items and most often they can’t afford them and put them on credit. This means that once one top credit card is maxed out, they will often go looking for another one. Don’t because if you can’t make the payments your credit will get screwed.
Not paying non-credit card related bills. Just because the loans and credit card payments are informed to the credit bureaus every month doesn’t mean that you can slack on the bills that aren’t. Just because they aren’t reported doesn’t mean that they won’t affect your credit score and they will if the bills end up going to a collection agency.
Getting a top credit card or loan without fully understanding the terms. Don’t get any cards or loans if you can’t fully understand the terms and conditions that come along with it. This is where you will come to understand the fees and costs associated with the card or loan. Make sure you understand what you are signing before you do.
After some huge life changes, make sure to adjust and evaluate your spending. This means after you get married, divorced or even have a baby. All of these change the way you should be spending your income and mean you would have a new budget and everything can change, which means you should make the changes. With changes come bigger responsibilities such as mortgages, car loans and other payments, which should all be taken into consideration when you are budgeting.
You need to understand that the credit problems don’t just happen overnight and if you aren’t paying attention then you won’t even notice. You need to be continuously monitoring your debt, the level of debt compared to the credit limits and your payments. If you can keep on top of those things, then you should be alright, but just make sure to avoid making these stupid mistakes.