Credit cards are an important part of building your credit score. Not to mention, they can be a helpful tool for making large purchases that you don’t have the means to pay for in cash.
However, if misused, credit cards can seriously damage your overall credit score, and result in a substantial amount of money lost. To help you avoid credit card mishaps, here are some of the most common ones that you should look out for.
Constantly Carrying Debt
It’s important that you pay off your debts as quickly as possible. Letting debts carry on and on is a huge waste of your money. Remember, debt comes with interest attached, and the longer you let the interest accumulate, the more money you’re losing. In other words, the sooner you pay off your debts, the sooner you’ll be free from interest rates.
After all, you don’t want to move into an assisted living facility with debt looming over your head. Pay off your credit card bills in full every month whenever you can. If you can’t pay the full amount, then pay as much as you can to pay off the debt faster.
Maxing Out Cards
Maxing out your credit cards will significantly hit your credit score. Make sure that you never take out more than 30% of your overall allowed credit. Otherwise, a high credit utilization rate signals to lenders that you’re financially unstable and not worthy of being loaned to. One day you may want to buy a car or a house, and you want to make sure that lenders see you’re good for paying off what you owe.
One of the worst things you can do is miss a credit card payment. Not only will it lead to late fees, but you’ll also lose points on your credit score. To combat this, sign up for automatic payment reminders. That way, you can pay your bill automatically from your checking account without having to do a thing. For people who tend to be forgetful, this can be a lifesaver.
Not Checking Your Credit Report
It’s important that you check your credit report regularly so that you know exactly what’s going on. You never know when there could be an outstanding balance or unpaid bill that you didn’t even realize was there. If you notice something on your credit report that doesn’t belong there, you can dispute it and hopefully get it removed altogether. This can significantly help raise your credit score and get it where it needs to be.
Remember, credit cards can be convenient, but also require responsibility. By avoiding the most common mistakes and using your credit cards as a financial supplement rather than your main source of spending, you should have a healthy credit score for years to come.