Common Credit Mistakes And How To Avoid Them

What is credit? Credit is defined as the ability to borrow money or something of value now with the understanding you will repay the lender later with interest. Managing credit well is one of the essential disciplines in your financial life.t.

11 Common Credit Mistakes To Avoid

1. Not Paying Your Credit Card On Time

To avoid being late in paying the required minimum, you should automate payments of all your bills, including your credit cards, through your bank account. When it comes to paying your card bills, automate and don’t procrastinate. The penalty charges are punitive for a reason.

2. Carrying A Large Balance On Your Credit Card

Paying the minimum on your credit card bill on time is an easy fix and makes the card issuers happy. They stand to make a tidy sum on interest income at the high APR rate they charge their average customer.

3. Don’t Close Any Credit Cards

Even if you don’t use certain credit cards, don’t close these accounts. Often we have several credit cards that were once appealing because of certain features or through a favorite store.

4. Not Reviewing Your Credit Report Periodically

The sooner you find the mistakes, the easier it is to fix them. Current and future creditors use your credit report and review its potential impact on your credit score.

5. Not Reading The Fine Print On Your Credit Agreements

Credit card agreements have incredibly complex terms and conditions. You should understand the particulars of the APR, penalty structure, the benefits from cashback, rewards, discounts, and other perks they are providing.

6. Paying A Loan Off Early Can Hurt Your Credit

If you suddenly received an incredible amount like a bonus or an inheritance, you may want to pay off your loan. Be aware that there may be negative consequences. Some loans, if paid ahead of time, incur pre-payment penalties. These are usually relatively small and worth getting rid of the debt burden.

7. Don’t Make Excessive Hard Inquiries For A Loan

Hard inquiries to your debt burden is often a big problem. These kinds of consequential inquiries come from those who apply for loans or have too many credit cards that they max out. If you have too much debt, applying for debt will worsen your situation. Instead, you should consider working with a financial debt counselor that can provide strategies to reduce what you owe.

Creditworthiness is a valuable trait when you need to borrow money, or someone wants a good read of your character. Take steps to avoid common credit mistakes that will put you in good standing and help you raise your score. To be in good financial health, managing credit well is an important discipline.

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