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FDIC Consumer News - Summer 2018
25th Anniversary Edition

[2003] Your Credit Record and Costly Mistakes to Avoid

Excerpted from “Simple Mistakes That Can Lower Your Credit Score … and Cost You Money,” Winter 2002/2003.

The better your credit record, the better your chances of obtaining a low-cost loan or insurance policy, renting an apartment or qualifying for a job. Here are some common mistakes that can significantly affect your credit history and ways to avoid these pitfalls.

Paying bills late. One or two late payments on your loans or other obligations over a long period of time may not significantly damage your credit record, but making a habit of this can count against you. Be especially careful with payments in the months before you apply for a loan because lenders put more emphasis on your recent payment history.

Not checking on your credit report. Inaccurate or missing information in your credit report could raise your borrowing costs or cause delays when you’re in a rush to make a major purchase. Many experts say you should review your credit reports at least once a year from each of the three major credit bureaus — Experian, Equifax and TransUnion (see [2000] When a Criminal's Cover Is Your Identity: Minimizing the Risk of Identity Theft for more details) — especially before you apply for a home loan or seek some other benefit where your credit report could affect the outcome.

Owning too many credit cards. A stack of credit cards and department store cards — even if you rarely use them or don’t carry a balance on them — represents money that you could borrow. As a result, if you apply for a mortgage, a car loan or some other important loan, you may only qualify for a smaller loan amount or a loan with increased costs or fees. Two or three general-purpose cards and a few (if any) cards issued by stores probably are enough for the average family. Consider keeping the cards you’ve had for a long time and handled well because they can show a long history of responsible credit use.