Let’s face it, we probably have all been guilty at one time or another of making mistakes where our credit is concerned. But some mistakes have more severe consequences than others, so it might help you to know what some of the most nasty credit card mistakes are and how they could influence your credit score because in this case, what you don’t know could hurt you.
Lenders trust those who have high credit scores and admirable credit reports. If you fit into this category, you will have an easier time securing additional credit and perhaps fulfilling some of your life’s goals like owning a home and travelling.
Here are seven of the most terrible mistakes you can make with credit cards so you can steer clear of them:
Ignoring interest rates and terms
None of us likes to read the fine print. It’s the stuff we usually skim over, but when it comes to choosing a credit card, get out the magnifying glass if you have to because you need to pore over all that information. Look for added fees and what interest rate you’ll be paying. The interest on most credit cards hovers at around 20%, but there are some low interest cards out there, too.
The minimum payment syndrome
Always try to pay the balance off each month, but if you can’t manage that, make an effort to pay more than the minimum required each payment cycle. Doing this consistently will not help you to pay off that credit card balance.
Cancelling your first credit card
This is a no-no even if you’re no longer using that account. The length of your credit history is married to that first credit card and cancelling it is one of the worst things you can do when it comes to your credit report and your credit score.
Think about what you’re buying with your credit card since it’s like borrowing money to make every purchase. Using a credit card frivolously to substitute for cash you don’t have in hand will hurt you in the long run. If you don’t have the money to make your monthly payment it will be reflected on your credit report and lower your credit score. In fact, 35% of your total credit score is your payment history.
Spending more than you need/maxing out your cards
It’s easy to impulse buy with a credit card — it’s one of the main credit card mistakes. Make sure you won’t regret those spur of the moment purchases that may sit in your closet forever. Plus, overspending can affect your credit utilization rate which is how much money you owe versus how much overall credit you have available to use. Lenders like that number to be 30% or lower. You will have a high utilization rate if your credit card always has a balance or are maxed out.
Lending your card
If you let a friend or family member use your credit card, just understand that you’re responsible for paying the bill, not him or her. What are you going to do if that person goes crazy with your card and he or she doesn’t pay you back? Your credit score suffers from unpaid debt. Lending your credit card is not a wise thing to do under any circumstance.
Applying for many cards at the same time
Every credit card application affects your credit score. When you go crazy applying for a number of cards at once it will be reflected in a lower credit score, plus if lenders see you’re applying for many cards at the same time, they may see that as a warning that you may be having difficulties financially.