6 Mistakes to Avoid When You Protect Credit

Low credit scores can make it difficult to qualify for the financing you need to purchase a home, buy a car, or even get a new line of credit. While there are actions you can take to improve your credit score, it’s just as important to protect credit from mistakes or fraudulent activity that could impact your score. 

You may not have even realized you need to protect credit, but in today’s digital world, it’s crucial to take steps to not only build your credit but protect it as well. These are some of the biggest mistakes to avoid when protecting your credit. 

Not Knowing Your Credit Score 

It’s your responsibility to have a rough idea of your credit score. Whether you’re considering applying for a mortgage soon or you just want to improve your credit, you can’t make real progress or identify a dip without knowing where you started. 

You can pull free credit reports from AnnualCreditReport.com or the three main credit bureaus— Experian, Equifax and TransUnion—but they typically don’t include your credit score. However, you can usually access your credit score for free from credit card issuers, lenders, credit monitoring services or free third-party credit score tools. Be sure to determine whether you’re using a FICO® Score or a Vantage Score. Both scores will reveal insights into your credit health but over 90% of lenders use FICO® scores in their decisions.  

When you have a rough idea of your credit score, it will help you better understand what types of financing and interest rates you may qualify for and give you a baseline to detect sudden negative changes in your credit. 

Failing to Monitor Your Credit Report 

Using a free credit report tool is a great way to gain some information about your credit, but it’s not just a one-time check. You should monitor your credit report at least monthly to proactively protect credit and as of 2023 you can now check your credit report for free once a week by using each bureau’s online tools. Security.org reports that 63% of American credit card holders have been victimized by fraud, and 51% have been victimized more than once. 

Credit card fraud is a rampant problem, so it’s crucial to regularly monitor your credit report to detect fraudulent charges or inaccuracies quickly.
 

Using Too Much Credit 

Your credit utilization ratio is one of the important metrics that determines your credit score. Essentially, credit utilization is the percentage of credit you’ve used compared to how much you’re allotted. If you have a $10,000 credit card limit, it’s not ideal to have an outstanding balance of $8,000. 

Making Late Payments 

The easiest way to negatively impact your credit is to make late or low payments. Failing to pay your statement balance each month will not only harm your credit, but it could also result in interest charges that cost you even more money. To protect credit, always make on-time payments and do your best to pay off the whole statement rather than just the minimum payment due. 

Moving, Not Paying, Debt 

More than 80% of Americans have some kind of consumer debt, across mortgages, car loans, student loans, credit cards and other debts. Many are tempted to use financial resources like installment loans or balance transfer credit cards to simplify their debt and make it easier to pay off. 

While this may make it easier to make payments and could reduce the total interest cost over time, it won’t protect your credit. Consolidating debt may help you get more organized, but paying off the principal owed is much more important. 

Opening Too Many Accounts 

Opening new credit cards just to increase your available credit could backfire and lower your credit score. New credit accounts impact your credit score and further complicate your ability to pay down debts. The more accounts that are in poor standing, the more likely your credit score is to drop. Maintaining a manageable number of credit cards and loans will help you protect credit. 

Building credit is important to helping you qualify for financing and giving you access to the most competitive interest rates. However, it’s just as important to protect credit to ensure your hard work doesn’t go to waste. Through regular credit monitoring and practicing financial discipline, you can protect your credit and avoid mistakes that result in lower scores. 

Contact Information:
Name: Sonakshi Murze
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