The Biggest Four Credit Mistakes

Your credit score is an important number in your life. It is the key to loans and mortgages, so long as it is well cared for. Managing your finances to ensure a favorable credit score is not difficult. Despite this ease, there are a few big mistakes that can really hurt your credit score.

Do not, for any reason, max out your credit card. The ideal amount is only a third of the limit on any card. Using the majority of the limit on one or more of your cards, is an indication that you are living off of the card and may not be able to pay it back as easily as you have spent it. This is not an easy task, but it is essential for maintaining a good credit score.

Along the same lines, do not make a late payment. While easy to say, this is a big way to help or hurt your credit score. Late payments can cause your rates to rise and hit you with major penalties, but it brings into question your financial responsibility. Nobody is going to lend money to someone who is shown to have a bad history with making payments on time. Establish yourself as a responsible person with regards to making payments, and lenders will be more willing to lend to you.

Do not give up. Making mistakes is part of being human. Missing a payment will not ruin your score, so you should not give up, as that can really hurt your score. Even if your score is trashed, above all else seven years will erase all negative entries. Late payments may not even hurt the score if they are very isolated with no other issues appearing on the report. Being late a day is much better than a week, which is much, much better than for two months. Practicing good financial management techniques over an extended length of time will give great benefit. While items will stick around for seven years, the last two years are the most vital.

The last big mistake to make is to use a card that does not report to the credit bureaus. Reporting is not required, and many cards do not report at all. While this may seem like it would be a benefit, since any bad issues will not appear on your credit report, if your account ever goes to collections that will appear on the report. So now you have a card that seems like it would not be a factor in your score, but it is in fact the worst card to have. It will never improve your credit score since it does not report to the bureaus, but it can hurt your credit score very hard, since collections is the worst thing that can occur. Whenever you sign up for a new credit card, be sure to check that the creditor will report back to one of the three bureaus.

Practicing good finance is important to maintaining a good credit score. However, there are mistakes that one should avoid in order to keep the score high.

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