As we’re closing the Increase My Credit Score series, it’s essential to know the credit score mistakes people make and how to avoid them. Based on my experiences and what I’ve seen when advising people, I came up with this list. 

There are consequences to our actions. However, we can always avoid such mistakes by knowing them in advance. Therefore, here are the mistakes people make with their credit scores. 

Credit Score Mistake #1: Letting family or friends use your name to get a loan. 

One of the biggest mistakes and the most common one is when people let their family or friends use their name to get a loan. By experience, I can tell you that you should never let anyone get a loan under your name.

Like I explained in Everything You Must Understand About Credit Scores blog post, I was unconsciously letting my dad use my name to get a car loan. I remember us agreeing that he would pay the loan every month. Everything worked well until an unexpected event happened.

When you let your family or friend use your name to get a phone, a car loan or any loans, it’s dangerous. You will be stressing when it’s time to pay the bills. And when there’s a missing payment, it will affect your credit score, not theirs.

Therefore, be mindful of that and never let anyone use you just because they’re family. I know that we all want to help our loved ones, but I’m convinced that there’s a better way to do it.

You must learn how to say no and explain how this can affect your credit score. You are fully responsible for your finances, so I suggest finding a better way to help them without hurting your credit score.

You can help them find a plan B. For example, a person can buy the item cash and not get a loan. You can also help them find a better solution according to their credit score.

Credit Score Mistake #2: Not controlling their credit card usage.

Most of the time, people don’t have control over their spending. When it comes to credit card usage, many of them let their credit card balance reach the credit limit.

There are a few bad money habits here that can make this happen. The first is when some people use their credit cards a lot and only pay the minimum payment. This method is ineffective, and you will wake up with a big, uncontrollable balance.

The reason behind this is, when you pay the minimum payment, you’re paying the interest. That’s why, in the second blog post, I highly recommended to pay off more than the minimum amount.

The second is that some people pay off their bills with their credit cards. Unless you pay it off right away, this can hurt your credit. The mistake here is, people pay their bills with their credit card and then pay the minimum payment. As explained above, the credit card balance accumulates when you only pay the minimum.

Therefore, I strongly suggest that you pay off your bills automatically with your bank account. This way, you pay your bills in cash, and you are aware of it. Your credit card can also be set up as an automatic payment with your bank.

The third is people make big purchases when they know that they can’t afford it now. Unless you plan to pay everything off in a short period, I suggest not buying anything that you can’t afford with your credit card.

Credit Score Mistake #3: Borrowing more than required.

The word borrowing, debts, is taboo for me, and I hope it becomes taboo for you. I despise borrowing and debts. However, I understand that some people need to do it to survive (short term). 

When it comes to your credit score, it shows on your credit report whenever you borrow money or get a loan. This can appear as a hard hit on your credit report, so be careful. However, if you REALLY need to get a loan, get the amount that you need.

Know the difference between “need” and “want.” I’m talking about car loans, mortgage, student loans, and any type of loans you can get in this category. Only buy the car that you can afford; this also goes with the money you’re taking from the bank.

If you cannot afford it, or if you can’t pay it off in a short period, don’t do it. The best way to avoid it is to plan ahead and save. If you’re employed, I recommend that you have special savings account for big purchases.

Credit Score Mistake #4: Using the wrong credit card.

Because credit cards are a primary tool that can ruin or help our credit score, we must know which one best fits us. There’s a lot of credit cards out there, and I get overwhelmed when I receive offers. So, I kept my first and last credit card since 2015 with me.

With all the credit cards out there, people tend to have more than 3 credit cards. Everyone has their reasons for having many credit cards, but the most common one is the benefits that come with it.

Some people get one credit card and then apply for another because it comes with better benefits. You will eventually have more than 3 credit cards and multiple hard hit inquiries when you do this.

Others will get a credit card without knowing the benefits and the fees. Many credit cards come with fees; I recommend staying away from that, mainly if the benefits don’t serve you.

The two reasons above make people obtain different credit cards, which means applying for new credit cards, which will hurt your credit score. Also, it gets overwhelming when you receive different statements for each card. The fewer statements you receive, the less stress and more control you have. You also avoid forgetting to pay off your balance.

Things to do before applying for a credit card:

As mentioned above, credit cards can easily hurt your credit score. Therefore, to avoid damaging your credit score, do your due diligence and read what you’re applying for.

Pay attention to the interest rate, the fees, and the benefits. I recommend that you obtain a credit card that matches your lifestyle. If you’re someone that travels a lot, get a credit card that has benefits for travellers. 

Don’t get a credit card from a company; there are no benefits from it in the long run. Don’t get it if you just want discounts or free stuff from that particular store. There are points cards for it, and this option won’t hurt your credit score.

Make it a habit to always see your credit card balance. At least once a week, you’re aware of the bills coming out and the next statement date. Nowadays, many credit card companies/banks have apps or websites to view your spending and use them as often as possible.

Credit Score Mistakes, to finish:

To finish this series, you must understand that your money habits will affect you in the long term. Don’t let people use your name to obtain a loan. When you care about yourself, you won’t let other people use you for their own benefits. 

Start caring about your credit card usage and how often you apply for it. Put a limit on the number of credit cards you should have. Be careful about using your credit card and make sure that you’re using the one that fits your lifestyle, and borrow what you need and not want.

I know how hard it can be, but I learned with experience, and now I’m sharing that with you. A part of being single and even when you’re in a relationship, as an individual, these things will affect you in the long run. 

Protect your finances, protect your relationships, protect your life. 

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