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Credit Building Mistakes to Avoid: Common Pitfalls and How to Steer Clear

December 23, 2022

Credit building mistakes can be costly, but they're also entirely avoidable with some awareness and attention. After all, there’s nothing inherently “bad” about credit cards — they can be an excellent way to improve your credit, but only if used wisely. 

Unfortunately, many people make mistakes, such as carrying high balances, missing payments, or applying for too many credit cards simultaneously. These errors can significantly damage your credit and make it much harder to achieve your financial goals. 

If you’re ready to take that first step back towards financial freedom and a better credit score, we’ve outlined the four most impactful credit building mistakes you should avoid to help you explore the most effective ways to boost your credit score and set your financial goals.

Credit Building Products

Credit building products have become increasingly popular over the past few years, and for good reason. They offer a way for people to improve their credit scores and financial standing without resorting to traditional credit card or loan options. Some common credit building products include:

  • Secured credit cards
  • Traditional credit builder loans
  • Cheese Credit Builder loan (and app!)

A Cheese Credit Builder loan is a great option because it allows users to build their credit score while putting money aside in a protected account. It works like this:

  • You take out a small loan, and Cheese holds onto the money in a secured and protected account
  • Choose your loan amount — $500, $1,000, or $2,000
  • Make on-time payments over 12 or 24 months
  • Once the loan is fully repaid, you get the money back (minus interest)

As you can see, these products offer a way to build credit without taking on a lot of debt, making them an excellent option for those who want to improve their credit score without racking up “traditional” credit card debt (or, a better option for those who can’t access regular, unsecured credit cards).

The 4 Most Common Credit Building Errors

If you’re looking to improve your credit score in 2024, it's important to understand the most common credit building errors people make. Avoiding these mistakes will help you achieve your credit goals and keep you financially secure in the long term.

1. Taking On Too Much Credit Card Debt

One of the biggest mistakes people make while building credit is taking on too much credit card debt. Credit cards can be a great tool to build your credit if used responsibly, but if you only pay the minimum amount due each month, the interest rate and balance can add up quickly, making it challenging to pay off your balance. As a result, your credit score will suffer.

2. Opening/Closing Too Many Accounts

While opening new accounts can increase your total available credit, it can also result in more hard inquiries on your credit report, which can lower your score. Similarly, closing old accounts can decrease your available credit and impact your score negatively, as the length of your credit history accounts for 15% of your score.

3. Exceeding Your Credit Card Limit

Exceeding your credit card limit is yet another common (and massive!) mistake people make while building credit. Not only will this result in over-limit fees, but it also shows lenders that you are a high-risk borrower. Try to keep your credit card usage below 30% of your total credit limit, as it can impact your score negatively.

4. Not Paying Attention to Credit Security

Finally, one of the most significant mistakes you can make while building credit is not paying attention to credit security. Identity theft and fraud are on the rise, and falling victim to these can wreak havoc on your credit report. To avoid falling victim, monitor your credit report for any signs of fraudulent activity and take appropriate measures to secure your personal information ASAP.

The Importance of Monitoring Your Credit

Credit monitoring may not seem the most exciting or glamorous thing to do, but it's crucial for your financial well-being. As mentioned, ignoring your credit report could lead to financial regrets and credit mistakes you'll wish you'd avoided. Thankfully, it's not too late to start making these important changes in the new year.

To avoid credit damage, it's essential to keep an eye on your credit report regularly. Look for inaccuracies, missed payments, suspicious activity, or delinquent accounts. Catching these issues early can help you address them before they spiral out of control. 

If you do find any errors, take action to resolve them immediately. Contact credit bureaus and creditors to have any inaccuracies corrected.

Additionally, there are tips for avoiding credit damage, such as keeping your credit utilization ratio below 30%, paying your credit card bills on time, and avoiding opening too many accounts in a short period. 

Remember, credit mistakes to avoid aren’t just limited to late payments or collections or even one minor error on your credit report. Every financial decision you make can impact your credit score, so it's essential to be aware of how you use your credit.

Using Cheese to Build Better Credit

Building better credit in the new year might feel overwhelming or even impossible (it’s definitely not, but we understand the feeling), but with Cheese, boosting your credit score in the New Year is much simpler. 

Our Credit Builder program can help you build and strengthen your credit score while saving money and preparing for life’s financial emergencies. Here's how.

Build Credit Worry-Free

Our Credit Builder program is designed to help you establish credit and improve your credit score without putting you at risk of accumulating debt. 

We believe in responsible lending, so we work with you to create a repayment plan that fits your budget and financial goals. That way, you can make monthly payments to your deposit account and build your credit without worrying about overspending or falling behind on payments.

Check Your Credit Score and Credit Report

To build better credit, you need to know where you stand. That's why we encourage all our customers to check their credit scores and credit reports regularly. It’s also why we make it super easy to do so.

With Cheese, you can access your credit score and monitor your credit report for free. When you sign up for our Credit Builder program, you also get access to credit monitoring and alerts to stay on top of any changes to your credit profile.

Don't let past mistakes hold you back  — find the right financial products needed to help propel you into a brighter future. Sign up now to start building better credit today with Cheese.

Cheese Credit Builder

Cheese helps you build credit and save money on autopilot.

- No Credit Check or Admin Fees
- Get a Custom Credit Builder Loan
- Build Your Credit and Save Money