5 Common Credit Mistakes and How to Avoid Them
In 2019, only 20% of Americans had an “exceptional” credit score.
Credit is a quick and easy way to spend money. But the choices you make while using these cards can affect your credit rating and financial health.
To help you, we’ve compiled a list of common credit mistakes people make.
1. Spending Without a Plan May Lead to Late Payments
When using credit cards, ask yourself: “Will I make enough money to pay this back?”
Knowing your sources of income and being responsible for what you spend is key. Late payments negatively affects your credit score so paying off debt on time is important.
Delayed payments may induce penalties so pay them within a 30-day window so this doesn’t affect your overall credit score. To avoid late payments, set up payment reminders or autopay through your bank.
If you’re looking for more advice check out this website for more details.
2. Paying Back the Smallest Amount
Boosting credit scores is your main priority. Because of this, avoid paying minimum payments as it takes longer for you to pay everything back. If not, this will incur interest and affect your credit utilization ratio, the available percentage of credit used at one time.
3. Spending up to Your Maximum Credit
Spending over 30% of your balance can also damage your credit score. Avoid this as it creates over-the-limit fees and penalty interest rates that may compromise your credit limit.
To keep a high credit score, monitor your balance and if you have a large debt then use the avalanche method to pay it back.
4. Using Multiple Credit Cards
Applying for multiple credit cards can affect your credit rating.
Lenders will be apprehensive about the number of applications they’ve received and you’ll be denied a credit card. To avoid this, only apply for new credit cards when you need one.
5. Make Sure You Know the Terms of Your Credit
Many people skip the terms and conditions when receiving a new credit card. But it’s important to read through them as it’ll give you control over and respect your spending. After all, no one wants to be bombarded with fines and credit reports. So before you use the card, learn about your billing cycle and what your grace period is are they’re an important part of your credit card.
As a general rule, look over your credit card terms and conditions at least once a year. You can find these on your credit card issuer’s site or call them.
These Are the Most Common Credit Mistakes
Now you know the most common credit mistakes.
It’s important to create an ironclad payment plan and repay as much as possible so you’re out of debt sooner. You should also avoid using multiple credit cards and know the terms and conditions so you don’t face further obstacles. Good luck!
Hopefully, you found this article helpful. If you want to see more, check out our posts on everything from Business to Technology.