Want a high credit rating or score? If so, credit and sensibility go hand-in-hand. Knowing the fundamentals of using credit is valuable. Yet, many smart, intelligent people are never trained in the basic teachings of Credit 101. With this said, these individuals typically apply for their first credit card during their freshman year of college, and exceed the limit within the first six months.
Acquiring credit is easy – especially for young adults. This is ironic considering that many young adults have part-time jobs and little money. Still, this does not stop credit card companies from mailing an onslaught of pre-approval credit card offers with high interest rates. Credit card companies play on the psyche of humans. People often want what they cannot afford. This might include big homes, luxury vehicles, designer merchandise, and so forth. Consequently, credit card companies make acquiring high-ticketed items easier. Alas, many people shop uncontrollably without considering the long-term effects.
Credit responsibility does not require an in-depth study of finances. What is does entail is reasonableness. Many credit mistakes are avoidable. Before experiencing out of control debt and a negative credit rating, be aware of the top five common credit mistakes, and endeavor to avoid them.
Five Credit Mistakes:
Opening Numerous Lines of Credit: It’s inevitable, the more available credit, the more we spend. Fight the urge and stop opening new credit accounts. Limit credit cards to two or three. Along with too many lines of credit, too many inquiries also have a negative effect on your credit.
Paying the Minimum Payment: If you have a low balance, paying the minimum is not a problem. However, if your credit card balance totals $1000, and the minimum is $10, the likelihood of paying the full balance in this century is slim to none.
Too Many Maxed-Out Credit Accounts: Credit rating is not only affected by your ability to submit the minimum payment on time, but also by your amount of outstanding debt. Credit cards balances should not exceed 25% of the credit limit. In actuality, too much debt decreases credit scores.
Skipped or Late Payment: Never pay a credit card payment late. Also, if making credit card payments online, the majority of payments must be received by 2:00 P.M. on the due date. Payments received after the cutoff time may be subjected to a late fee.
Never Checking Credit Report: To protect your identity, and credit, obtain a copy of your personal credit report annually. For double protection, get a copy from each of the three credit bureaus, and subscribe to a credit alert service.