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3 Things You Should NEVER Do When Trying To Build Your Credit Score

Borrowing money is always a risk and if you are not careful, you can easily find yourself in a lot of debt. Once you start missing payments and relying on credit to pay your living expenses, your credit score will drop rapidly. This makes things very difficult in the future because lenders will be unwilling to deal with you. When it comes to getting a car loan or a mortgage, you’re going to struggle. That’s why it’s important to get yourself out of debt as soon as possible. 

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Unfortunately, even once your debt is paid off, you are still left with a bad credit score. The good news is, you can repair your credit score over time, so you can still meet your financial goals in the future. The bad news is, a lot of people go about this the wrong way and end up making things worse. If you are trying to rebuild your credit score, make sure you avoid these big mistakes. 

Never Borrowing Money

Borrowing money is what got you into this situation in the first place, so surely you should avoid it in the future? Actually, that’s not true because you can’t build your credit again unless you borrow money. You need to demonstrate that you are able to make the repayments if you want your credit score to grow, so don’t cancel all of your credit cards straight away. Your credit score is partly based on your credit utilization, which means the amount of available credit you use. For example, if you have a credit card with a limit of $1000 and you spend $100, your credit utilization is 10%. Ideally, your credit utilization limit should be under 30% because this shows that you can use credit responsibly but you are not reliant on it. 

Applying For The Wrong Credit Cards

Although it’s important that you still use credit, you need to be careful about where you get it from. If you apply for a credit card and get declined, this negatively affects your credit score. So, look for secured cards that are designed for people that want to rebuild credit. You can also get small online loans designed for people with poor credit. By borrowing small amounts from the right places, you can gradually build your score. If possible, always use credit options that let you get pre-approved without damaging your credit score. 

Not Changing Your Spending Habits 

A lot of people make the mistake of working hard to rebuild their credit but they don’t change their spending habits, so they keep falling back into debt again. They go round and round in circles, building their credit score and then knocking it back down again. It’s important to consider why you got into debt in the first place and make some changes so you can avoid it in the future

As long as you avoid these common mistakes, you can rebuild your credit score and improve your finances. But if you fall into these traps, you will find it much harder to stay on top of things.

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