Expert Debt Management
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5 Credit blunders to avert – Safeguarding your credit score
5 Credit blunders to avert – Safeguarding your credit score

Do you dream of saving thousands of dollars on all your biggest purchases? If answered yes, there’s only one thing that you can do about it: maintain good credit. In today’s lending market, your credit is used to determine what rates you will pay for some of the big purchases of life like your home (mortgage loan), car (auto loan) and even education (
student loans). A good credit rating also influences the interest rates on your credit cards. Even further, nowadays, your credit score is also checked by your landlord before he gives you an apartment, by your insurance agent before he offers you an insurance policy and by your employer before he offers you a job in his company. Thus, you can well understand the all-encompassing impact of your credit score. 

Given the huge role of your credit rating, it is needless to mention that you need to take good care of your credit score. But how will you maintain an immaculate credit report that will speak well of your financial records and about your financial behavior? Using your credit cards is not an easy matter as most of us make some common mistakes that have a direct impact on our credit score. The way we use our credit cards, take a huge part of formulating our credit score. Hence, making mistakes can take a serious toll on our finances. 

Credit card mistakes that can straightaway lower your credit rating

If you’re using credit cards, here are some of the most common credit card mistakes that you should take into consideration if you’re keen on protecting your credit score for the near future.

1. Missing a bill payment: Making late payments or not paying your credit card payments at all can reflect negatively on your credit score. Although there are some cards that carry a grace period during which you won’t be penalized even if you don’t make payments, yet there are some others on which you may get a derogatory remark on your credit report for being 30 days or 60 or 90 days late. This will negatively affect your percentage of on-time payments, which is a significant factor that constitutes your credit score. In case you’re severely delinquent, your debt account will straightaway reach the debt collections.

2. Maxing out on your credit cards: Did you know that an important factor of your credit score is your credit utilization rate? This means that the credit bureaus take into account how much of your available credit you have used at a given moment. When you apply for credit, creditors consider 30% or less as a healthy utilization rate as this means that you have enough credit left to prove that you’re responsible with your finances and with your payments. So, don’t make the mistake of maxing out your credit cards as this has a harsh impact on your credit rating.

3. Taking out cash advances: Are you aware of the fact that taking cash out of the ATM using your credit card is a kind of cash advance or a cash loan that you take from your credit card issuer? While this is an extremely convenient way of withdrawing money without having to go through the hassles of banking, this is expensive as well. You have to pay a fee per cash advance and also a higher interest rate (which is higher than the rate of your card). Apart from this, the other problem is that this can hurt your credit score depending on the amount that you’ve taken out. If the outstanding balance of the credit card is too high, taking out a cash advance will push your credit utilization rate as well.

4. Juggling with balance transfers: Apart from combining your debt through debt consolidation companies, you can also juggle debt between balance transfers. Moving debt from a high interest card to one with a lower rate does make financial sense but only when you carefully read the fine print of the card. If you make the mistake of ignoring or misunderstanding the balance transfer rules, you could end up owing more money than before. Check whether an introductory period entails a transfer fee. Check the interest rate after the completion of the introductory period. With most cards, the interest rate shoots high up and you remain shocked.

5. Ignoring your monthly statements: This is the most common mistake seen among the credit card users. Most of them ignore their credit card billing statements even when they appear both in their mailbox and through post. As soon as you receive your monthly statement, take a few minutes to look at it. The issuer may also make mistakes and hence you need to be sure that there are no erroneous charges. If there are sudden unfamiliar charges, this may also signal possibilities of identity theft. Hence, read your bill and understand how you will pay off your debt within the given period of time.

So, if you’re a credit card holder, be responsible enough to avoid committing the above mentioned credit mistakes. This way you can protect your credit score from being damaged.

Meta des: Check out the common credit card mistakes that take a toll on an individual’s credit report and bar him from getting new lines of credit in the near future.
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