Credit score is the most important factor when it comes to lenders viewing if you are not only a responsible borrower, but also entitled to the most favorable rates. With the average credit score of 667 according to a recent study by Experian, those applying for credit will not be granted the best rates available, so why pay extra interest if you have to and boost your scores right away and avoid some of the biggest credit card mistakes that you can possibly make.
Maxing Out Accounts
Even if you are paying off the entire balance each month, it is still not good for your score to keep a high balance at any time, as your debt-to-credit utilization ratio will be maxed out. A third of your credit score has to do with debt ratio, so if you see your balance approaching your limit, you will need to not only curb spending, but perhaps use another payment method.
Making Late Payments
If you are in the habit of making late payments then you will want to get that under control right now, setting aside payment reminders or direct withdrawal, so that you make at least the payment by the due date. After not only will incur late charge and a possible interest rate hike, but if you are more than thirty days late it will be reported to credit bureaus and take up to seven years to remove. When situations like this arise it’s smart to look into credit repair companies to expedite the process of cleaning up your report.
Closing Old Accounts
You may think it is responsible to close accounts to stop from using a card, but closing accounts not only reduce overall credit available, as well as the history with that open account, further reduce credit score, so cutting up the card and leaving the account open is the better option.
Carrying a Balance Each Month
Once you carry over a balance to the next month you begin paying interest to the creditors, sometimes upwards of 17% APR, which can be huge depending on the balance. Once you sink further and further it is hard to get out, so do your best to pay off the account each month, further taking a look at reducing spending habits.
Opening Too Many at Once
Credit inquiries when a lender pulls your credit will lower scores and stay on reports for two years, so make sure what you are applying for is necessary, and don’t send the wrong message applying for everything at once.