Three common credit mistakes

Three common credit mistakes

There are three common credit mistakes most people make that lower their overall credit score. Knowing these mistakes is important so you can avoid making them yourself. These three mistakes can be avoided and help to improve your overall credit score.

The first credit mistake is carrying a balance. Some financial advice says to always carry a balance because it can help your score, but this is not necessarily true. While having 10% of your overall credit used at a time will not make a huge impact, having 0% of your credit being used will have the same impact. Having no balance on your credit card is better to avoid accidentally carrying more than 10% or paying interest on this amount. Your credit utilization makes up 30% of your credit score, so it’s better to carry no balance.

The second credit mistake is paying your credit card statement late. Your payment history makes up 35% of your credit score, the largest category. Not only does paying your credit card statement lower your credit score, but it also will cause you to pay additional fees and interest. Therefore, making too many late payments or missing payments altogether will negatively impact your credit score.

The final credit mistake is avoiding credit all together. People know the danger of credit and try to avoid credit together. This is not the best way to combat this fear of a bad credit score. It is very hard to have a credit score. If you don’t use credit, you still technically have a credit score somewhere in the middle. Unless you purposefully have no credit, you will have a lower approval rate or higher interest when you apply for loans simply because you avoided credit.