Credit-Score Mistakes That Last a Long Time
Some credit mistakes are a lot worse than others. Little ones, like paying a credit card bill a day late, may cost you a penalty fee, but that’s a relatively minor irritation – it’s not going to stand between you and a mortgage. Other seemingly small slip-ups can lead to full-fledged disasters. Mistakes that have long-running ripple effects hurt the most. A late payment, for example, can get sent to a collection agency, then perhaps grow into a repossession or bankruptcy. Those batter your credit and stay on your credit record for years. Likewise, co-signing a loan for someone who is later unable to pay can hamstring your finances for a long time.
Common mistakes that can hurt your finances:
Missing a payment:
Paying just a day late might cost you a penalty fee, but your credit score won’t suffer because creditors can’t report your account as delinquent until it’s 30 days past due. If you have a high score, going 30 days late can knock as much as 100 points off your score – and it stays on your credit report for seven years. The damage gets worse if you let the account slide to 60 days past due, 90 days past due or more.
Raiding retirement funds to pay debt:
Most people don’t want to file for bankruptcy. Some have tapped – or even emptied – retirement savings in a desperate attempt to stay afloat. That often just delays the inevitable. Then they turn around and file for bankruptcy. Retirement savings are typically protected in bankruptcy, but money already withdrawn cannot be recovered.
Co-signing a loan:
Co-signing so a friend or relative can get credit is often a mistake. If they can’t get it on their own, there must be a problem. If the primary borrower doesn’t pay as agreed, it can leave both your relationship and your credit in tatters. Even if the borrower repays as agreed, remaining on the loan can limit your borrowing capacity. Before you co-sign, ask if you can be taken off the loan at some point.
Ignoring the details:
Not knowing your credit cards’ interest rates or when a 0% interest rate ends can cost you. Knowing interest rates can tell you which card to use when you’re paying for a new transmission and need to carry that balance for a while, for instance. Knowing when a teaser rate ends can help you ensure you’ve paid off the balance by then. It’s important to read the fine print. Some cards charge deferred interest if there is still a balance at the end of the introductory period.
October 21, 2020.Florida Realtors. 5 Credit-Score Mistakes That Last a Long Time.
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