Your credit score is a gatekeeper. It can make or break your chances of getting the best rate on a loan and in some cases it can even affect whether you get a job. The better your credit score, the more money you can keep in your pocket. And who couldn’t use a little extra cash? FINRA puts it best with this example:
“Suppose you want to borrow $200,000 in the form of a fixed-rate 30-year mortgage. If your credit score is in the highest category, 760 to 850, a lender might charge you 3.307% interest for the loan. This means a monthly payment of $877. If, however, your credit score is in a lower range, 620 to 639 for example, lenders might charge you 4.869%, which would result in a $1,061 monthly payment. Although quite respectable, the lower credit score would cost you $184 a month more for your mortgage. Over the life of the loan, you would be paying $66,343 more than if you had the best credit score. Think about what you could do with that extra $184 per month.”
It is in your best interest to do everything you can to keep your score as high as possible. Be aware of things that may cause your three digits to take a downward spiral. Here are five situations that could trash your credit score.
1. Not correcting credit report errors
Don’t ignore errors in your credit report; they won’t fix themselves. Depending on the severity of the reporting error, you could lose hundreds of points from your credit score. A foreclosure, for example, could cost you up to 160 points. Don’t pay the price for someone else’s missteps. And you have no excuse when it comes to ordering your credit report. Thanks to the Fair Credit Reporting Act, consumers are entitled to one free report from each of the three major credit reporting agencies (Experian, Equifax, and TransUnion) every 12 months. As soon as you see something awry in your credit report, alert all three agencies as soon as possible.