6 Mistakes that are Killing your Credit Score
Want to improve your credit score? Find out if any of these 6 common mistakes are what’s bringing it down, and how to correct them.
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Your credit score is affected by many factors.
anging from how much of your available credit you use to how old your credit history is.
This is why improving your credit score could take years in some cases, and a few months at best.
All of those factors aside though, you’d be surprised to know that in many cases,
The simplest way to increase your credit score fast, is correcting any errors found on your credit report.
According to a study conducted by the FTC, as many as 1 in 5 of consumers find errors on their credit reports, which could potentially result in the consumer receiving “less favorable” credit terms from lenders.
The Easiest Way to Improve Your Credit Score
How can you make sure this doesn’t happen to you?
Check your credit report regularly and examine it carefully.
There’s various avenues to accomplish this:
There are three major credit bureaus that report your FICO® score to lenders.
Using the information in your file, lenders determine your credit worthiness:
You do have the right as a consumer to obtain a free credit report once every 12 months.
You can pull the reports for free from each of their websites.
However, they often charge a small fee to provide your credit score.
You can also pull your free credit report by going to www.AnnualCreditReport.com or by calling toll-free 1-877-322-8228.
Note that this method will only get you your credit report but it will not disclose your credit score.
My preferred method to obtain both my credit report and credit score is to go straight to the source at myFICO.com. There, I can get the reports and scores from all three credit bureaus at once.
Want to learn more about what items affect your credit and how you can use them to your advantage to increase your credit score?
Download my Quick Start Guide to Increasing Your Credit Score today!
Correct These Common Mistakes to Improve Your Credit Score
Potential errors on your report could vary widely.
From your personal information such as name and address being reported incorrectly, to your account history being incomplete or incorrect.
Here’s 6 of the most commonly found errors on credit reports, that could bring down your credit significantly.
1. An Account That’s Still Open But it’s Showing as Closed
This one’s a very common mistake, and it’s a biggie.
Why?
Because if the account is showing as closed, it won’t count towards your credit utilization ratio, which accounts for up to 35% of your total credit score.
Additionally, this mistake could also negatively impact the age of your credit.
This is especially true if the account is one of the oldest ones you have.
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2. A Payment Marked as Late or Missed Even Though it Was Paid on Time
This mistake could cost you dearly.
According to Credit.com, even one payment marked as late or missed could lower down your credit score up to 110 points depending on how old the payment is, and how late it’s been marked.
A late or missed payment that happened in the recent past counts more heavily against your credit than older ones.
This is why it’s important to keep up to date with your credit score!
Monitor it on a regular basis.
3. An Account That You Don’t Recognize
When I first checked my credit report, I saw several accounts I didn’t recognize.
I had been a victim of identity theft, and it took several years and many headaches to undo the damage that had been done to my score.
The best way to protect yourself is to check your credit score regularly.
Keep your information safe, and get Identity Theft Protection.
I like to get ID theft protection from myFICO, since I also get credit monitoring from them, so I bundle both services. Check out their plans here!
I later learned that my identity was stolen when I applied for credit at a local mattress store.
My application had not been shredded after being reviewed, as they promised they would.
Instead, they threw it away in the back dumpster with countless other applications.
From there, it got stolen by an identity theft ring operating in the area.
4. An Account that Has Been Paid Off Still Reporting a Balance
If you’ve been working hard at paying off your debt, and you’ve been able to zero out some of your accounts, it can be very frustrating to find that your credit report isn’t showing the progress you worked so hard for.
Aside from being frustrating, if some of the accounts you paid had been in collections, the credit scoring models will look more favorably upon accounts that have been paid off, even if they’d been previously written off by the creditor.
5. An Inquiry Older Than Two Years Still Showing up on Your report
There are two kinds of credit inquiries.
Soft inquiries don’t affect your credit.
They usually come from employers, landlords, and creditors you already have a relationship with.
A hard inquiry, one initiated by a potential creditor when trying to determine if they can extend a line of credit to you, should only stay on your record for two years.
As best practice, you should keep inquiries to a minimum.
Aim for 4 at the most at any given time, to minimize the negative impact on your credit.
Not only does each inquiry knock off several points from your score, but having multiple inquiries may show a potential creditor that you’re at risk of going on a shopping spree and racking up your debt.
If an inquiry is showing up on your credit even though it was done over two years ago, get it off ASAP!
6. A Derogatory Mark Older Than 7 Years Still Showing up on Your Report
Did you have a late payment or bad public record added to your record? These derogatory marks stay on your credit for 7 years – almost a decade!
I remember when the last derogatory mark fell off my credit report.
The feeling was so empowering and exciting. It felt as if I was finally free from my really bad past financial decisions.
How much could a derogatory mark affect you? It depends on what’s causing it.
An account marked as late 30 days won’t affect you as much as if it’s marked 90 days past due.
The effect on your credit will increase depending on what type of offense it is.
Regardless of what the case is, these marks can significantly affect your credit score.
So if you want to improve your credit score quickly, removing any derogatory marks that shouldn’t be there is key!
What if I Find Errors on my Report?
If you do find any errors on your credit report, you can dispute it with the bureau reporting the inaccurate information.
Note however, that if you find the same mistake on more than one of your credit reports, you will need to file a separate complaint with each of the bureaus that are reporting it.
Since this can be extremely time consuming and frustrating, you may want to consider working with a reputable credit repair company.
However, keep in mind that if you don’t want the added expense, you can repair your credit yourself.
What Happens Next?
Whichever avenue you choose, be sure to keep a record of the dispute date.
The bureaus have 30 days from the date they receive your claim to investigate it.
If they do find that they made a mistake, they must remove or adjust the disputed item.
Note that this often takes one or two “cycles”.
Remember to check your credit report a month or two after you filed the dispute to ensure the item was indeed corrected.
If the bureaus find no valid reason to remove the item you disputed, they will communicate this to you or notate your account.
Although there are many factors and metrics that affect your credit, checking it regularly for errors is by far the easiest and most effective way to get the most out of your score.
Stay informed and alert.
Be familiar with your accounts so you can easily spot any discrepancies, and dispute them as soon as you find them.
By taking a proactive approach to your credit, you can greatly minimize the potential negative impact a mistake could have on your score.
What kind of errors have you found on your credit report? Join the conversation below!
