Credit Sins: 7 Mistakes People Make When Using Credit
When used responsibly, credit cards are a convenient way to make a purchase. However, misuse of credit can wreck your financial health and greatly hinder your ability to secure housing, a vehicle, and sometimes even employment. If you want to stay out of trouble, you’ll need to keep a close eye on your spending and payment habits.
Your credit score will surely take a hit if you’re not responsible. In fact, the total amount you owe on your credit cards accounts for 30% of your FICO score. So don’t be reckless when it comes to credit balances. Here are seven credit blunders you should avoid.
Don’t fly off the handle if you can’t get a credit issue resolved. A debt collector or credit card representative may not be as helpful if you scream or spew expletives. Try to stay calm. If you feel your issue is not being handled properly, file a complaint with the Consumer Financial Protection Bureau.
It might be tempting to sweep your troubles under the rug, but hiding your credit problems will only make things worse. Don’t be ashamed if you need assistance with managing your credit. If you’ve gotten to a point where you feel like you’re in over your head in credit card debt, there are resources available to you. Start by getting in touch with a certified credit counselor. The National Foundation for Credit Counseling has an online directory where you can search for a local counselor.
Resist the urge to purchase more than you need just because you have enough available credit. Before you know it, you’ll only be able to pay the minimum each month, and you’ll have a monstrous balance on your hands. Only charge what you need and pay off the balance in full as soon as you can.
You don’t need six credit cards. Really. The general rule of thumb is to have no more than two credit cards. Any more than that is asking for trouble. Furthermore, when you are applying for credit, lenders view several open credit lines as potential risk. The way lenders see it, the more available credit you have, the more tempting it will be to charge, leading to higher debt down the road.
Don’t let your desire for that shiny new tech gadget lead you to charge an impulse buy on your credit card. Remember that a credit card contains borrowed money. If you don’t have enough cash in your bank account to cover a purchase, it would be in your best interest to turn around and leave the store (or shut down your computer if you’re about to make an online purchase). Wherever you are, step away.
Are you jealous because your friend has a black card or some other fancy “invitation-only” credit card and you don’t? Don’t be — there are plenty of credit cards out there that are just as good. The most important thing is that your credit card has basic consumer protections in place that will shield you from fraud. All of the extras don’t really matter if your identity has been stolen, now, does it?
Don’t be messy with your credit. Make sure to keep track of your credit card purchases so that you don’t end up carrying a large balance each month or accidentally missing a payment. Payment history accounts for 35% of your total FICO score.
More from The Cheat Sheet:
- How I Made Over $2,000 From Only Using Credit Cards
- The 3 Biggest Factors That Affect Your Credit Score
- 3 Tips for First-Time Credit Card Users