For better or worse, your credit report has the capability of affecting nearly every facet of your life; that’s just the way the modern world works. So when you have a poor credit history, it can really start to feel like the walls are caving in around you.
It’s important at this moment to think clearly, and not lose focus. Whatever happens, it’s absolutely vital that you do not slip up and make mistakes in the process of repairing your credit. In an effort to help prepare you, we’ve gathered five common pitfalls below.
- Not Knowing Your Credit Score
39 percent of Americans don’t know their current credit score, according to a 2015 Chase Slate Credit Survey (by way of MyCreditBar). This is the quickest way to find yourself in trouble. Without complete awareness of your financial situation, how could you possibly repair it? These days, with Credit Karma offering completely free no strings attached weekly credit scores, there really is no excuse for such financial negligence.
- Excessively Consolidating Debt
Wisebread.com states it best, “When it comes to financial issues and credit scores, variety is definitely the spice of life.” Meaning, primarily, that lenders perk up most when a credit report includes an array of meager account balances which are religiously paid off monthly.
Some like the idea of having just one account balance to keep their eye on each month, but ultimately this will negatively affect your credit report.
The best course of action is to manage every account each month. Keep each balance relatively low, but active. On top of those points, it’s important that under no circumstances should you close any zero balance credit card accounts.
Closing accounts will lower your credit limit, which negatively affects your credit report.
- Hiring a Credit Repair Company
When the Federal Trade Commission says “it’s never seen a legitimate credit repair company,” It’s probably in your best interest to avoid dealing with credit repair companies. Their number one goal is to make money, and they’ll use your desperation to do so.
Those who have gone this route at first think they’ve made the right decision when accounts start disappearing from their credit report. They do this by log-jamming a credit bureau with disputes.
However, this is merely temporary. Sooner or later, everything will return to how it was and you will be out of the fees you paid the credit repair company.
- Filing Bankruptcy
The reasoning against bankruptcy, at least when it comes to credit card repair, is simple: It will only negatively affect your credit. Filing for bankruptcy stays on your report for seven to ten years. After which, lenders will frequently inquire about your history with bankruptcy.
Essentially, filing for bankruptcy will follow you forever, will not help improve your credit report, and will only hinder your access to credit accounts, loans, or many other opportunities. It should be crystal clear, if you have to file for bankruptcy, don’t do it to repair your credit.
- Pretending It Will All Go Away
Perhaps the biggest mistake of them all would be pretending your bad credit history can somehow disappear or transform into good credit. Not only will that not happen, it will destroy your credit beyond belief.
If you’re ready to fight today and win back your credit life, then you have to face this thing head on. There is no fighting this with your eyes closed in a fantasy world.
You have to admit you got yourself into this mess, and you can get yourself out. Now that you have an idea on what not to do, you’ll be ahead of the game and on the road to freedom.