There are other types of credit ratings, but the most common is your FICO score, which runs from 300 to 850 points.

According to most, a score of 760 or above is considered exceptional and will secure you the best bargains available.

A score of 700 to 760 is solid but may not qualify you for the best prices.

With a score of 640 to 700, you're likely to get authorized for credit but not at the best rates, whereas a score of 640 or lower will make it challenging to get approved for credit at all. Any credit you do obtain will come with exorbitant interest rates.

Credit is utilized to assess not only whether you're creditworthy enough to obtain a credit card, get a mortgage, rent an apartment, or get an auto loan, but it also influences the interest rate you qualify for.

To avoid the latter, stay away from these typical credit mistakes:

Carrying a Big Balance

Getting yourself into debt is never a wise decision. Maintaining a large credit card load might raise your credit utilization ratio or the percentage of your credit limit that you utilize. This ratio, together with other measures of your overall debt, accounts for around 30% of your credit score.

The ratio is determined using the end-of-month balance on your bill, which means that even if you pay off your obligation every month, your credit score may suffer. Experts recommend using less than a third of your credit limit to keep your debt usage percentage low.

Closing Credit Cards

Closing a credit card account may appear to be the sensible thing to do, but it might harm your credit. Closing a card reduces the amount of credit you have accessible, which might negatively impact your debt usage ratio (unless you don't have any credit card debt).

Your credit score is also affected by the length of your credit history, so having a credit card open can benefit you.

Some recommend keeping your card open and charging a small amount every month to keep it active. However, if having so many credit cards in your pocket is too tempting, you could get rid of the one with the lowest credit limit.

Late Payments

Late payments on credit cards, student loans, mortgages, and even doctor's bills can all lower your credit score if the provider reports them to the credit bureaus.

Defaulting on a loan or credit card is the most obvious credit no-no, which means you don't pay back the money owing to a lender. Declaring bankruptcy or foreclosing on a home, for example, might easily shave 100 points or more from a credit score.

Anything that may be categorized as defaults on obligations is a bombshell that will leave a considerable burning hole on your credit!

Opening Too Many Cards

While having some credit is beneficial to your credit score, there is such a thing as having too much credit.

When you apply for a loan or a credit card, the lender does a credit check on you, which generally lowers your credit score by several points.

Multiple credit cards or loans, as well as boosting your overall available credit, can be a warning indicator.

If you're constantly adding to your potential credit, credit firms will see you as a risk of becoming overextended at some point.

Not Having Any Credit

A rising percentage of Americans are now abandoning their credit cards in favor of debit and prepaid cards. While this may keep you out of debt, it will not improve your credit score.

You're usually regarded as unscorable if you don't have any credit history, which means there isn't enough activity on your credit file to compute a score. According to experts, this causes many lenders to view you as too risky to take a chance on.

A good example would be going into a job interview with no resume. To grant you credit, a lender would have to take a chance on you — and that's not a good situation for you to be in.

It also decreases the diversity of your credit file, which accounts for 10% of your credit score, and rewards you for handling various types of credit, such as credit cards, mortgages, and auto loans.

Co-Signing/Being a Guarantor

When a friend or relative can't qualify on their own, it's tempting to help them out by co-signing a loan. However, it's a tremendous risk to take, and it can often lead to credit problems.

By signing on as a co-signer, you agree to share equal responsibility for the debt, which means any missed payments or defaults will appear on your credit report, lowering your credit score. The person you are standing for may potentially subject you to collection actions or even litigation.

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