It is important to be mindful of our credit card spending and repayment habits. A few credit card missteps are unfortunately all it takes to knock points off our valuable credit scores.
If you want to keep your credit score healthy and your debt to a manageable size, make sure you avoid these three common credit card mistakes:
Count Your Lines of Credit: While it is good to vary the types of credit you take out, if you open a large number of lines of credit at once, this can negatively impact your credit score. The credit bureaus prefer to see consistent repayment on a manageable, strategic number of credit lines over a long period of time. Opening several lines of credit at once can suggest financial impulsiveness and instability. Thoughtful debt repayment and credit use is what credit bureaus value.
Debt-to-Income Ratio: You may think that you will be okay building a small mountain of debt in the present and work on repaying it over the coming years. It is important to remember that having a large debt-to-income ratio can also negatively impact your score. This means that if the amount of debt you owe far surpasses your regular monthly income, even if you still have time before your credit starts growing interest, your credit score may still be affected.
Length of Time: If you let a balance sit for too long, your credit score can take a hit. Set a goal of paying this balance down as much as possible over a six- to twelve-month period. If possible, transfer this balance to another card with a lower interest rate. This will help reduce the interest that is making your balance larger. If you would like to pay down this balance faster, consider developing a second source of income for yourself through a side business.
Another way to negatively ding your credit score is to miss payment due dates. Make sure you don’t forget any deadlines by setting up automatic transfers and using organizational tools to help you remember your payment schedules!
Visit the Syncis blog at www.syncis.com/blog to learn more helpful tips.