Erasing your credit is not an easy feat to do most especially if you’re in a financial crisis. Your lenders will brand you as a risk and you can’t apply for a mortgage loan because your credit status is questionable. You attempt to hire the services of a professional credit score repair agency only to be discouraged because of their service fee.
This article will focus on 4 erroneous credit presumptions many bad credit-stricken individuals believe in and cling to as the “proper way” to clear negative credit standing. It’s interesting to note that these presumptions aren’t without proof: they are, in fact, truths most individuals fail to understand properly. Hence, they end up in a financial dilemma that destroys their reputation.
Credit Presumptions to Avoid
These are the most common presumed theories behind mistakes unconsciously being committed by unsuspecting individuals who only want to repair credit scores for creditworthiness:
- Making late payments – never assume that paying your outstanding obligations beyond your due date is still fine. Your credit score relies heavily on this aspect since regular timely payments draw an impression of financial responsibility. Failure on this part will impact your reputation as a trustworthy person.
- Canceling credit card accounts – closing your credit card only increases your debt-to-limit ratio. Manage your bills wisely and control your expenditures. You have to monitor your credit card used to make sure you don’t drown from too much outstanding credit.
- Being a co-signor – one of the biggest mistakes many commit is allowing others to make you a co-signor. Never indulge with anyone requesting you to help them out with their loan payments. Chances are, and this happens all the time, they’ll flake on you and leave you with a debt you’ll need to settle immediately. If you won’t comply, the primary borrower’s lenders will run after you and your credit standing could be jeopardized. You can’t remove co-signor from mortgage easily since you signed a contract and that document is binding. Any attempt to breach it will constitute legal action against you and not against the principal borrower.
- Getting a retail store card for discounts – getting a credit card arises from a need. However, if having a card makes your life miserable, siphons out every dollar you have, and leaves you in dire financial distress, consider laying low on your credit card applications. Likewise, acquiring a retail store card is not a guarantee your outstanding bills will ease up because of the notion of a discount on every use of it.
Your manner of treating credit issues speaks highly of your personality as a financial manager and responsible payee. Your obligations take a bigger share of your day-to-day activities; thus, you have to plan well in properly settling your accounts without placing yourself in a compromising position. You can always seek help from a professional credit score advisor most especially if you’re finding ways to a better credit score
Other Credit Myths You’re Not Aware Of
Aside from the 4 erroneous presumptions presented, there are a few more misconceptions regarding credit cards. They are the following:
- Carrying credit balance month after month – think twice about maintaining a monthly balance on your credit cards. This does more harm than good to your credit standing. Your credit score suffers making you less financially appealing to lenders.
- Minimum payments only – similar to the first item but worse since you are only paying a fraction or percentage of the total outstanding balance. If you think doing this helps in improving your credit score, it’s not going to happen. What is more likely to happen is your balance will be applied with an interest rate based on the “remaining” balance and will make your new total bill greater than expected.
- Taking for granted your billing statement – not reviewing your billing statement can impact your credit score not because of the total bill you have to pay but on erroneous credit records that can stain your creditworthiness. Check your bills religiously and report any inaccurate data immediately.
- Taking a cash advance – if you want to make your life miserable, take a cash advance. While this prospect appears reasonable (i.e. pay for your existing credit balance), this only makes your finances weaker. You’ll incur a higher interest rate and repaying this will be a struggle to overcome.
- Maxing out your credit – you are at a disadvantage if you exhaust all your credit limits because you end up incurring debt you’ll have to pay immediately to “stabilize” your credit account. Avoid this since your credit score won’t improve at all.
- Applying for too many cards – while closing our credit cards is not suggested, it’s also recommended not to apply for several credit cards at a time. Doing this will drown you in debt and you could find yourself in a heap of financial trouble afterword. Your credit score will suffer as well and your credibility as a creditor will be highly compromised.
Recognizing credit errors will help you get a clearer understanding of how to overcome your credit shortcomings. Being observant of your expenses and having control over your finances build your credibility and lenders won’t consider you a threat to their business. Be cognizant of your habits and always seek professional assistance if in doubt regarding your financial management skills. Mistakes happen and are natural occurrences but some of these are mostly due to negligence and indifference.
We are your mortgage and credit repair experts for 9 years running with offices in and around Canada. Our expertise lies in credit assessment led by our founder Faizal Garasia, an authority both in credit and mortgage transactions.
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