While you can hope for a lowes build and grow for money to come out of nowhere, but it takes good financial planning, not to mention limiting spending in order to free up extra money and get out of debt, more importantly staying out of debt. These are important financial decisions and the same goes for your credit, equally important, as that affects the interest rates you get on huge monthly payments such as your mortgage, any loans, and credit cards. If you’re not careful you could be wrecking your credit, putting you further and further behind from getting the best rates on the market.
Not Paying Attention to Credit Report
These days you never know who has your information anymore, as you often hear about those that get their card information stolen, whether a glance occurs at a gas pump or if you leave it out too long when paying the tab at a restaurant, even worse have a store you shopped at getting compromised. Even the credit bureaus that been hacked. It’s a good idea to get a free copy of your credit report from the major credit bureaus at least once a year to verify all your info and accounts are up to date and accurate.
One of the largest factors of your credit score has to do with payment history. While even being a day late will cost you a late fee and even an interest rate bump, but it’s when you get to be thirty days late is when your credit will take a hit, and even if it’s a mistake, it will stay on your credit report for up to seven years, making it all more important to either set up automated payments, or at least set reminders to pay on or before the due date.
Racking Up Debt
Just as important as payment history when it comes to your credit score has to do with the amount of debt compared to the available credit. The closer you reach your credit limit and your credit utilization is used up, the lower your credit score will go, so if you are using a card for spending each month, at least try and make sure the full balance is paid off by the statement due date, not only to avoid interest, but to keep the balance as low as you can for when that account is reported to credit.
Closing Existing Credit Card Accounts
While you should be applauded for getting out of debt, but one mistake people make when they finally do see that zero balance is to close the account so they don’t risk going on another spending spree, but this can actually lower your score because you are taking away this available credit and if there is a balance on another card, it would increase your utilization. If you want to avoid using the card, just cut it up, but leave the account open so that available credit stays with you every month, even if you’re not using the account.