Four People Who Might Ruin Your Credit
Some people don’t give their credit scores much thought, but if you have a high rating, the opportunities are endless. People with good credit typically qualify for loans, and a good credit score can open doors to job opportunities and lower insurance premiums.
The truth is, building a good credit score is not rocket science. Understandably, most people don’t learn personal finance basics in school, and many parents fail to teach these lessons to their children. But even if you didn’t receive early money-management and credit advice, there are ways to achieve a good score. However, it isn’t enough to build a good credit rating, you have to keep it. And while you might be responsible with your credit and make smart decisions, the actions of others might ruin your score.
Here’s a look at four people who might destroy your good credit rating.
If you rent or purchase a home with another person, namely a roommate, this person’s actions might inadvertently ruin your credit score. Sure, you might keep your finances separate. This person may have his own bank account and credit cards, and you have yours. But when you and your roommate sign a joint lease or get a joint mortgage, you’re both responsible for the monthly payment. And unfortunately, if your roommate skips out on a lease or mortgage, his actions can affect your finances and credit rating.
You can continue paying the entire rent on mortgage yourself, which can cut into your disposable income and leave you house poor. However, if you cannot afford the entire payment by yourself – and you’re unable to find another roommate – the landlord or mortgage company might report the delinquency to the credit bureaus, which can lower your credit score.
There’s no rule that says spouses have to have joint credit accounts. But typically, spouses share everything including bank accounts and credit. This is perfectly okay. However, spouses need to be realistic about each others spending and credit habits. If you allow your spouse to use your credit card, and he or she accumulates a lot of debt, you’re ultimately responsible for these charges.
Whether they’re looking to buy a car, a house or attend college, many parents willingly cosign loans for their children. This can help young adults establish a credit history, and without their parent’s signature, some are unable to get financing. But while cosigning helps your children jump start their financial life, it’s extremely dangerous.
Truth be told, there’s a reason why your child needs a cosigner. If a lender feels that he isn’t worthy of a loan, why should you put your name and credit on the line? As a cosigner, you’re just as liable for this debt. He might agree to repay the bank, but the loan ultimately becomes your responsibility if he defaults. And if you’re unable to continue the payments, your credit score will suffer.
Only cosign for a child when you’re willing and able to accept responsibility for the loan if your child stops making the payment.
4. Unknown People
Protecting your personal information is a surefire way to avoid identity theft. This occurs when someone swipes your personal information, such as your Social Security number, your driver’s license or your credit card, and uses this information to make purchases in your name. As one of the fastest growing crimes, identity theft can happen to anyone. And unfortunately, it can take years to undo the damage.
To protect yourself, only enter your personal information on websites that are secured. Always check your credit report at least once a year, and it helps to sign up for credit report monitoring services. This way, you can detect identity theft early and avoid long-term damage. Most importantly, never share your Social Security number or credit information with anyone over the phone or online. And if a credit card statement doesn’t arrive in the mail, keep a close watch on your account.
Foolproof Ways to Repair Your Credit
Even if your credit isn’t in the best shape, there are many ways to make credit repair fast and easy. It all boils down to knowing which factors have a negative and a positive impact on your credit score. For example:
- Paying bills late: If your credit card or loan payments are more than 30 days late, your creditor may notify the bureaus. Each late payment knocks points off your credit score. Keep a record of your due dates, and pay early if possible.
- Reduce credit card debt: The amounts you owe creditors also influence your credit score. The more debt you have, the lower your rating. To give your score a boost, devise a strategy to eliminate your credit card debt. Pay more than your minimums. Review your budget and cut expenses to free up cash. Also, get creative and think of ways to generate extra cash. Some people have successfully paid off credit card debt by getting a part-time job, and others moonlight as a freelancer to earn extra cash.
- Correct credit report errors: Creditors make mistakes. Therefore, checking your credit report at least once a year, and disputing erroneous information can add points to your credit score. To get your free credit report, search online for free credit reports. It only takes a few minutes to verify your identity and receive copies of all three of your credit reports.
- Stop applying for new lines of credit: It doesn’t matter whether you want to save 20% off a purchase, or whether you feel pressured to apply for a credit card, too many credit inquiries can reduce your credit score – therefore, limit your credit applications. The number of points you’ll lose varies depending on your present credit score – but ranges anywhere from two to 10 points on average.
Good credit can take your further in life and create opportunities — but not if you allow others to destroy your good score. If your credit needs work, the above tips can point you in the right direction and help you achieve a stellar rating.