Three Credit Mistakes You Don’t Realize You’re Making
Your credit score is a key indicator of your financial health, and it can make or break your ability to buy a car, a home or even get a personal loan in a time of need. What’s more, some of the supposedly responsible money habits you’ve developed might actually be hurting your credit. If so, you’re not alone. Consumer research shows time and again that millions of Americans are making the same credit mistakes simply because they don’t realize the damage they’re doing. Steering clear of the three following pitfalls, however, will help you keep your credit on track.
Opening Store Credit Cards
You think you’re saving money in the long run by opening cards with spending perks at the places you shop the most. Unfortunately, having too many credit cards can be disastrous for your credit score. Each new account opened shortens the average age of your accounts. The older your average account age, the better – and vice versa. Remember to always work toward a long trend of positive credit history, and think twice before signing up for new plastic.
Paying the Minimum Payment
Consumers with the best credit scores are those who successfully pay down debt quickly. Paying the minimum payment meets legal standards and keeps your accounts in good standing, but it keeps debts on your account years longer than is advisable. Work to put every dollar you can against credit card debt, and your credit score will thank you.
Failing to Understand Debt-To-Credit Ratio
If you must carry credit card balances from month to month, work doggedly to keep your debt-to-credit ratio under 30 percent. This ratio refers to the amount of credit you’re using compared to the amount available. Even if you only have a few credit cards and you pay more than the minimum payment each month, carrying a high debt-to-credit ratio will still damage your credit score.
Using credit can be a savvy financial move, and most Americans take advantage of it. Just be sure to avoid the above pitfalls in order to keep your credit score healthy.
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