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5 Credit Card Misconceptions to Avoid If You Want to Maintain Good Credit Score

Submitted by admin on October 1st, 2024

That is why credit cards are useful but serious problems when using them can downgrade credit score and limit opportunities to receive loans with lower interest. To hold a good credit score is very important when using credit cards there must be some wise ways to use them. Check out five credit card mistakes you wish to ignore to ensure your credit score remains healthy.

1. Missing Payments

This the most important aspect of observing the credit score and this is by paying our bills as agreed. You lose many points as payment history contributes to the FICO score, and if you miss one payment, your score goes down. Another concern when you delay a payment is that it is not just the late fee that will cost you, your card issuer might report to the credit bureaus that you are a dead on and this appears on your credit report for seven years at most.

Tip: Create alerts or recurring payments to make certain that you’re not going to overlook any due time. In case you are unable to make the full payment then try and make a small down payment to prevent further credit score damage.

2. Maxing Out Your Credit Limit

It also means that how you behave with your credit limits greatly influences your credit score, including credit utilization. Basically; it is advisable to keep your credit utilization ratio to below 30% especially across all credit cards. Having your credit cards to their limits, or making large purchases with high card balances increases your risk factors and your credit rating goes down.

Tip: Maintain low balances by the timely payment of charges emitted or by paying more than once in a billing cycle. This will assist in keeping your credit utilization low and in doing so greatly enhance your credit ratings.

3. Applying for Several New Credit Accounts All at Once

If there is one thing that must be avoided it is the temptation to apply for multiple credit card accounts to get the benefits that one company offers together with the benefits that another company offers. Whenever you apply for a new credit card, the issuer makes a hard inquiry that will cost you a few points. Further, it is also wrong to open as many accounts as one can within a short period, this will make the credit reference facility to deem it appropriate to decline your credit request for fear that you may be in dire need of credit.

Tip: Major on the use of credit cards only when you really need them. Before opening a new account, it is wise to assess, if the account contributes to the achievement of personal financial objectives, and how credible one is likely to be in handling the new credit limit.

4. Closing Old Credit Accounts

This might come to the mind of many people as a wise step to take because little or rarely do they use it. However, closing a credit card can negatively impact your credit score in two ways: It lowers your total amount of available credit making your credit utilization rate higher; also, the average age of credit history decreases.

Tip: Maintain the credit accounts that you have had the longest even if they are not used very frequently. Bad credit history should be avoided, and long credit history and low credit utilization are a path to improving the credit rating.

5. I remember when I read the topic ‘Only Paying the minimum amount.’

Although this saves you from incurring penalty charges, it is not enough to ensure that your credit score is on the right side. In this case, you only pay the minimum balance, and in effect, you roll over the balance, in addition to the interest that will be charged, leading to a cycle of rising card debt. A high credit card balance will affect the score, thus it becomes more challenging to meet the interest payments.

Tip: Whenever possible, pay off your credit card balance in full each month. This not only helps avoid interest charges but also keeps your credit utilization low, both of which are important for maintaining a healthy credit score.