Credit cards are an essential part of today’s economy. We build credit, which impacts our ability to get loans for purchases like homes or cars. But having credit cards also means using them wisely, and it can be easy to let some things fall through the cracks when paying with plastic. I frequently see the same mistakes happening. Here are some of the most common credit mistakes and how to avoid them.
Carrying a Balance
A pervasive belief is that carrying a balance on your credit card builds your credit. But that’s simply a myth. Maintaining a balance higher than 30% of the credit limit monthly will negatively affect your credit score and cost you more money in interest over time. The lower your monthly balance, the better, and paying it off every month is ideal.
Making Minimum Payments
The minimum payment is, of course, the lowest amount you can pay each month. But people often make the mistake of only paying the minimum. While it’s ideal to pay off the balance each month, pay as much as you can toward it if that’s not possible.
Missing a Payment
Even a single missed payment can affect your credit score significantly. Your score can drop between 17 and 83 points for every 30-days past due period. It’s good to know that creditors don’t report late payments until they’re 30 days late, so make a payment as soon as you realize you’ve missed it.
Not Reviewing Your Statement
A colossal mistake so many people make is not checking their statements monthly. You may trust that your statement is accurate, but it only takes one thing to snowball and ruin your credit. Review your transactions every couple of weeks to ensure charges are correct and there isn’t anything fraudulent on your account. At the very least, check your statement every month.
Getting a Cash Advance
Don’t use credit cards to take a cash advance. They charge interest immediately on cash, as opposed to purchases. You will also have to pay a fee of as much as 5% of the money you’ve withdrawn. Cash advances are a red flag for creditors as they determine you may be at a greater risk of falling behind in your payments.
Closing an Account
Closing credit card accounts can negatively impact your credit score. That doesn’t mean you should keep a balance on all your cards, but you can pay them off and keep them open to showcase your creditworthiness moving forward. The one exception to this rule is if the card has a high annual fee.
When Should You Seek Credit Repair Assistance?
Even if you’ve done everything right, debt can happen. Best Credit RX can help.
If you’re unable to secure a loan or your credit score keeps you from landing a job, for example, it’s time to contact a qualified credit repair counselor who can walk you through the steps. Sign up now.