3 Credit Mistakes To Avoid
Good credit can make life a lot easier. When your credit score is high, you can easily qualify for a home or car loan. You will also be able to save a significant amount of money over time by securing lower interest rates.
It can be easy to mess up your credit without even realizing it. Avoid these credit mistakes to ensure you are actively preserving the integrity of your credit score in the future.
1. Don't Request High Limits
Credit cards can be a double-edged sword when it comes to building and maintaining your credit score. A credit card that is used responsibly can help bolster your credit, but it can be very easy to fall into a credit trap.
One mistake you want to avoid when it comes to using a credit card is requesting a high limit. You should always start out with a conservative credit limit until you are confident that you have established responsible charging and payment behaviors. By keeping limits low, you can avoid racking up too much debt in a short period of time.
2. Don't Limit Yourself to One Card
It might not make sense at first, but having multiple credit cards can actually be a great way to improve your credit score. Credit bureaus factor in the number of credit lines you have in good standing when calculating your credit score.
A few open credit cards with a good payment history can go a long way toward building or improving your credit score. Just be sure that you keep the balance on each of your cards low so that you don't accrue debt faster than you are able to repay it.
3. Don't Carry a Balance
Credit cards can be valuable tools to help you cover purchases you might not have money for upfront. It can be tempting to charge frivolous items that you just want, but don't need, to your credit cards when the balance is low.
Carrying a balance on your credit cards from one month to the next can be a dangerous cycle. Not only will you end up repaying a larger amount due to accrued interest, you could lower your credit score by increasing your debt-to-income ratio.
Make a goal to pay off the balance of your credit cards in full at the end of each payment period. A good way to ensure you can do this is to only charge an item to your credit card if you currently have the cash to buy the item outright.
For more information, contact companies like Total Credit Solutions.