May 09, 2022 / Credit
Everyone has a few financial regrets. No one is perfect with their money 100% of the time. But some financial faux pas are less forgiving than others. In fact, some can impact your credit for years to come and severely limit your financial flexibility. Here are three money missteps you should try to avoid and one way you can find a fresh start with your finances.
Your payment history accounts for 35% of your overall credit score. If you miss a payment or make a late payment on a credit account, it can have a profound and lasting impact on your credit. Even one missed payment can stay on your credit report for as long as 7 years. If too many missed payments pile up, your credit report and credit score can take some serious damage.
Most lenders rely on payment history as a predictor of your future ability to repay your loans. And many will deny loans to those with too many missed or late payments on their record. It’s a good reminder to always pay your loans on time, every time. Doing so can help you avoid the credit pitfalls that tend to linger for years to come.
Credit bureaus consider lots of factors when calculating your credit score, but one of the most important is your credit utilization, or your used credit to available credit ratio. In fact, it accounts for about 30% of your overall credit score.
Most financial experts agree that it’s best to keep your overall credit utilization ratio to about 30%. Maxing out multiple credit cards can push your utilization ratio well above the recommended 30% threshold and make it more difficult to obtain a loan at many banks.
Even if you don’t use your old credit cards anymore, it’s usually a good idea to keep those credit accounts open. If you close them out, you run the risk of reducing both your overall credit age (the length of time you’ve had credit accounts open) and your credit utilization ratio.
Remember, paying your credit accounts on time and keeping a healthy credit utilization rate are the two most important factors impacting your credit. Even if you don’t intend to use your credit card, that available credit with a zero or low balance can keep your utilization low and look good on your credit report.
The fatal flaw of the financial system is that the only way to improve your credit is to show that you can be responsible with credit. But how can you prove your responsibility if your financial institutions won’t extend credit?
Fortunately, there are financial institutions that are willing to work with you, no matter your credit history. At Utah First, we have a no judging, just approving policy. We want to work with you to find the loan that’s right for you, so you can work to rebuild your credit over time.
If you’ve been denied a loan in the past, come talk to one of our helpful loan experts or apply for a loan online. We have auto loans for all credit types so you can leave the past in the past and work toward a better financial future.