While credit cards can be extremely helpful finance tools when they are used properly, helping you to build credit and work toward your financial goals, they can also have a lasting negative impact on your financial life if you use them improperly.
People often make mistakes with their credit cards, which end up eating away at their credit scores, leaving them in financial ruin.
Let’s take a look at a few credit card mistakes you should avoid.
Issuers set credit limits when you open up a credit card. The limit is the total amount you will be able to spend on your credit card. For example, you might have a credit card with a $10,000 limit, which only allows you to spend $10,000.
However, just because you can spend that much on your credit card does not mean you should.
Most credit card holders can’t afford to reach their limit. It’s best to make sure you have the money in your checking account before making any large purchases.
If you’re not budgeting, you’re missing out on many of the benefits of a healthy financial life. It’s a good idea to have a list of your basic needs, wants, and goals for the future. When you don’t have a budget, it becomes unlikely that you’ll reach your future goals.
Rewards credit cards might seem enticing, especially when they provide goodies like travel points or cash back. However, people often see these as opportunities to spend more than they should.
Overspending is one of the biggest credit mistakes out there. If you spend time chasing rewards by trying to spend money that you don’t have, you could end up in debt.
One of the most important elements in your credit score is your history of on-time payments. In fact, it makes up 35% of your FICO score, which is more than your credit utilization ratio.
If you don’t make credit card payments on time, you’ll quickly see the negative impacts.
For starters, credit card companies often charge late fees for those who don’t make their payments on time, especially if it happens more than once. That late payment may also be a detriment to your credit score.
That kind of negative credit score information can take many years to disappear.
Your best-case scenario is to pay off your credit card balance in full each month.
Here at Personal Tradelines, we believe our goal is to help our clients throughout their journey to good credit.
It’s up to you to determine whether or not you have the financial will to responsibly use a credit card. Hopefully, learning about some of these common mistakes can help you avoid them on your journey to good credit.
If you feel that you are ready to start your journey to better credit, make sure to get in touch with us to discuss our many different tradeline options.