Credit repair is one of those things which are way easier said than done. While debt doesn’t happen overnight, getting out of it can take a longer time. These are the common mistakes you should avoid during your pursuit of debt freedom.
Transferring your balances
When you are transferring your balances, you are basically just replacing debt with another debt, and doesn’t help in addressing the problem of why you’ve been put into a bad credit situation and how can you come out of it. This option should only be considered if there’s a chance to transfer your balances from a high-interest account to a low-interest account.
Closing a credit card with balance
Thinking this can erase their debts and their problem is solved, many people commit this mistake, not knowing how badly it can hurt their credit score. If you are having difficulty managing your credit cards and feel the need to close some, make sure they are the newer credit cards and those without balances.
Closing your only credit card
Many people blame their debt to having a credit card and decide to just close any cards they have to prevent getting in debt again. However, a percentage of your credit score is actually based on the types of credit that you have, and having a credit card in the mix will show lenders that you are experienced in this type of credit and is likely to improve not only your credit score but also your chances of loan approval at the same time.
Applying for new credits
Another misconception about credit repair is that applying for new credit cards can boost credit score. However, it does just the opposite. When you open new accounts, your average credit age becomes shorter, which affects your credit score.
Hiring credit repair companies
Some people become overwhelmed when it comes to fixing their credit and feel the need to hire experts to lift off the burden from their shoulders. However, these supposed to be experts do not perform magic that would make your debt disappear. In fact, there’s nothing they can do that you can’t do yourself. In most cases, you even end up paying more than you should if you had done it on your own. You might have that peace of mind knowing that someone’s assisting you with your debt problem, but these companies charge you extra for delaying your debt payment, not to mention that some of them are scams and aren’t actually paying your money to your creditors.
Bankruptcy is like a nightmare that can haunt you forever. Once you filed bankruptcy, it will stay on your record for at least 7 to 10 years, and during that span of time, you’ll never know when the need to borrow money may arise. Unfortunately for you, having filed bankruptcy will make it virtually impossible to borrow or apply for utility services and other types of loans. Even if you managed to survive those years without the need for credit, your future lenders will ask if you ever filed bankruptcy in the past, so there’s no escape.