Credit Misuse Is The Problem
Avoid Credit Card Misuse
Having a credit card is not the problem with most people who get into financial trouble. Misuse of credit cards is usually on of the problems though! If you handle your credit cards the right way, they can improve your financial security and comfort. If you misuse them, they can make you miserable.
At the Frugal Pig, we are quite aware that stuff happens. There may be cases where misuse is warranted, but they should probably fall in the category of absolutely needing to fix your car so you can get to work, or needing dental servies right now. If you ever find yourself in an emergency situation, previous credit card misuse, over frivolous things, will only make your situation worse.
But mostly, the difference between a mediocre and a great credit score, comes down to small things. You can pay all of your bills on time, have money in the bank, and still be paying too much for credit.
Maxing Out Your Cards (Or Coming Close)
If you are constantly charging, and making low payments, you will find yourself coming close to using up your available credit. You may even charge an amount that puts your balance over your credit limit. Some credit card companies will allow a slight overage, and sometimes this is the right thing to do – but save it for emergencies, please!
- Running close to your credit card balances probably damages the credit score of more people than a lot of other credit infractions. New creditors consider the amount of credit you use vs. the amount of credit you have. Experts tell us to keep that balance below twenty-five percent, and I believe that anything over fifty percent will put a serious ding in your credit score. If you are current on your minimum payments, you may still be able to get more credit if you need it, but you will probably pay more for it.
- If you accidentally nudge your balance over your limit, and your creditor allows the infraction, you will probably get hit with a penalty fee. Of course, this fee will make your balance grow even longer. Of course, having balances over the maximum will harm your credit score too.
- If you make a habit of keeping your credit card balances low, you are much less likely to find yourself in an emergency situation where you are forced to max out your balances anyway. The big screen TV can certainly wait, but the dental crowns or new pair of glasses cannot.
Grabbing Every Credit Card Offer
You certainly do not have to accept every offer for a new credit card that you stumble across. Some people find that open credit card balances just create a hole they cannot avoid filling.
Sometimes a new offer may help you transfer high credit card balances to an offer with a lower rate. This could make sense. But it only helps you if your goal is to payoff your credit, and not just run up high balances on the old card and the new one!
Ignoring Your Credit Life
Really, if you pay attention to the way you use credit, it will probably curb a lot of other bad habits.
- Do – Check your credit reports. If you do not understand them, you should get some help. You may uncover errors that hurt your credit scores. You may also discover some bad habits, that you were unaware of, that are keeping you from having really good credit.
- Do – Check your credit card statements. You could have automatic payments coming out that you totally forgot about, you got tricked into signing up for, or are even fraudulent. Maybe some servicces could be cancelled.
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