Avoid These Common Credit Card Mistakes

  1. Getting too many credit cards:

While having a good debt-available credit ratio will build your credit and look favorable to lenders, if you have too much available credit, a lender may think: “What if they decide to max out all of these cards, what would the debt-income ratio be?” Not to mention that multiple credit inquiries will lower your credit score and may lead a lender to believe you are desperate for more money.

  1. Paying your bill late:

Not only will you face a late payment charge that may be higher than your minimum payment, this will show up on your credit report and lower your credit score.

  1. Ignoring your monthly statement:

Avoid late payments by checking your monthly credit card statements. Checking your monthly credit card statements will also allow you to make sure charges are correct, and catch identity theft, if you wait too long it may show up on your credit report.

  1. Exceeding your credit limit:

If you are approaching the top of your credit limit, try to use cash for subsequent purchases. If you don’t, your purchase may be rejected, unless you have authorized your card company to charge hefty over-the-limit fees.

  1. Misunderstanding introductory rates:

With introductory rates, often offered on big-ticket items, interest accumulates from the day of purchase. If you don’t pay off the debt during the introductory period, the interest will be charged retroactively, more than likely at a very high rate.

 

These are common mistakes made with credit cards that can damage your credit and hinder your ability to qualify for lending opportunities. The more you can learn about the terms of the credit cards you utilize, and credit card use in general, the better you will be able to manage your debt and position yourself for a strong credit score and financial life!

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Each person’s credit situation is unique. Results may vary, and CreditServices.com makes no guarantee of any particular result. The information in this site is intended for general informational purposes only, and is not to be construed as legal, tax, accounting, or other professional advice.  As such, it should not be used as, or relied upon, as a substitute for seeking professional legal, tax, accounting, or other advice. All information in this site is provided “as-is”, with no guarantee of completeness, accuracy, timeliness, or other results obtained from its use. In no event is CreditServices.com, its Affiliates, or their agents or employees liable to you or anyone else for any decision made or action taken in reliance on the information in this site. “Affiliate” means any entity that directly or indirectly owns or controls, is owned or controlled by, or is under common ownership or common control of the party in question.

One Late Payment

One prevalent misconception in the credit industry is that a single late payment is no big deal.  The reality is, on-time payments are the single most important factor in the FICO formula. Research conducted by FICO shows that a single 30-day late payment on a mortgage can shave 75 or more points off of a consumer’s credit score. In addition, late payments remain on a credit report for two years. As a result, what may at first seem insignificant can have a major effect on a FICO score. 35% of your score is based on payment history. This is the biggest factor of the FICO algorithm.

If you had a high credit score before the missed payment, then the reduction in your score will be higher than if you had mediocre or poor credit. 700-plus scores can be dropped 100 points or more with a missed payment.

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Each person’s credit situation is unique. Results may vary, and CreditServices.com makes no guarantee of any particular result. The information in this site is intended for general informational purposes only, and is not to be construed as legal, tax, accounting, or other professional advice.  As such, it should not be used as, or relied upon, as a substitute for seeking professional legal, tax, accounting, or other advice. All information in this site is provided “as-is”, with no guarantee of completeness, accuracy, timeliness, or other results obtained from its use. In no event is CreditServices.com, its Affiliates, or their agents or employees liable to you or anyone else for any decision made or action taken in reliance on the information in this site. “Affiliate” means any entity that directly or indirectly owns or controls, is owned or controlled by, or is under common ownership or common control of the party in question.