You know if you’ve ever applied for a mortgage, loan, or the credit card you use for purchases, that your credit score is a major factor in the rate you receive, and how you handle your credit card will decide your credit score fate. There are many pros to using a credit card, such as not having your bank account wiped out if fraudulent purchases are made like you would on a debit card, easily accepted anywhere, not to mention the rewards, that it can actually be argued that credit cards should be used for all purchases, provided you can use responsibly and get yourself into a mound of debt. By handling your credit card accurately, you can maintain good account standing and watch your credit score continue to climb so you can get the best available rates on the market.
Not Checking Your Credit Report
These days you just never know who could have accessed your credit file. Whether it’s getting your card information stolen at the gas pump or leaving your card out too long when paying a restaurant or bar tab, it’s good to check your credit report for free at least once a year from the major credit bureaus to ensure all accounts are up to date and accurate. While your score will not be included for free, you can actually view on your monthly credit card statements to make sure your score continues to be on the rise.
Sure, we all make mistakes, but unfortunately if you miss a payment and are thirty days late, it may take up to seven years for the blemish to go away, while severely damaging your score in the meantime, costing you even more money if you then apply and receive an unfavorable interest rate. By scheduling automated payments, you can avoid the risk of missing any payments. While it will not report on your credit, being even a day late can cause a late fee or a spike in interest rate.
Hitting Your Credit Limit
Just as important as your payment history is your credit utilization, which is the amount you have charged compared to your limit, so the higher you max out your card, the lower your credit score will go. Not only is paying off your statement balance every month important so that you don’t go into debt, but it helps to make sure your balance is at a minimum even if you use your account for every purchase. This is probably the most difficult part when it comes to a credit card because there really isn’t a hard stop like there is with a debit card running out of money but being mindful of your budget and what you can afford to payoff is extremely important to your personal finance.
Only Paying the Minimum
While paying the minimum required to keep your account in good stand according to your monthly statement is important to be paid by the due date, it’s such a small payment that it will do little to the balance and will probably mostly just cover interest, so the largest payment you can afford to pay, of course the statement balance being the most important, so that you can avoid carrying over a balance to the following month and be charged interest.
Closing a Zero Balance Account
If you have had trouble with spending in the past and found yourself in debt, it likely could have taken years to get out, so getting back into your old spending ways is probably not the first thing that comes to mind, so once you do get your account down to zero, you’re probably thinking about closing it right away. This can actually hurt your credit, however, due to the fact that if you have debt on other cards, closing the account will increase your credit utilization and could decrease your credit score. The best you can do if you want to keep your line open but not spend on it, is to cut up your card.
Not Taking Advantage of Rewards
Probably the best part about using a credit card is for the rewards, so if you’re currently not taking advantage of a card that has one, find one that does. By even making the purchases that you were going to make anyways, you can earn free money in the form of points that you can use for gift cards, miles, or hotel room, while even better, a check once a year with your cashback rewards.