Whether you have applied for a mortgage, auto loan, or a credit card, you know that your credit score is not only the deciding factor of whether you’re approved or not, but also at what interest rate you’re approved for. The higher the rate, the more you pay every month, so instead of wasting away money back to the lender, it’s important to ensure your credit score is as high as it can be so you can take advantage of the best interest rates on the market.
Not Checking Your Credit Score
With the amount of fraud that occurs these days, you never know when someone could not only be using your existing accounts, but creating new ones. By at least looking at your credit report once a year for free from the major credit bureaus, you can ensure all of your accounts are up to date and accurate. Monthly, you can view your credit score on your credit card statements, to make sure your score continues to trend in the right direction. If you notice a sudden dip, it’s a good idea to pull your report again to see what the issue is, even if it costs you money now, it will save you a fortune in the long-run if someone is fraudulently using your account.
Not Making On-Time Payments
One of the largest factors in your credit score has to do with your payment history. While you will not be hit on your score by being a day late, you could incur a late fee or interest rate spike, but if you’re thirty days late, it can stay on your credit report for years, whether it was a mistake or not, and your score can take a significant hit.
Maxing Out Your Available Credit
Just as important of factor on your credit score as payment history is the amount of credit utilization that you have. The closer you reach your credit limit, the lower your score will be. Not only does carrying over a balance every month hurt your score, but by not paying your entire monthly statement by the due date you will begin to pay interest, which only paying the minimum will do little to chip away at the balance, and could send you down a path to debt, so if you do carry over a balance it’s best to make the largest payments every month until you rid yourself of this burden.
Closing an Account with Zero Balance
No matter how long it takes to get out of credit card debt, it’s an accomplishment, so much in fact that you want to avoid going down that road again so you might think about closing your credit card account. While that is a safe route, but it could likely hurt your score, especially if you have balances on other cards, not to mention take away any length of credit. If you want to avoid using your credit card, you can always cut up the card so you can’t use, but keep it open so you can still have that available credit to help your credit score.