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Peter Dazeley/Getty Images
Don't close old credit card accounts
En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.
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Istockphoto
Don't max out your cards before a bankruptcy
We all know that gas prices can eat into our budgets. But even if your wallet is taking a serious hit every time you fill up your tank, it's still wise to avoid applying for gas cards and buying fuel on credit. Ditto for applying for department store credit cards. Gas cards and retail store cards usually have very high interest rates — far higher than national brand cards such as Visa or MasterCard. Plus, if you frequently apply for multiple credit cards, you'll generate inquiries on your credit report, lowering your credit score. To avoid these problems, only apply for credit when you truly need it.
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- See AlsoHere’s how interest rate hikes impact your money - AZ Big MediaIf You Need to Add 277 Points to Your Credit Score, Try This 90-Second MoveHow much can you earn with a 6.5% CD interest rate?How To Use Home Equity To Build Wealth
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Don't apply for gas cards and department store cards
If someone calls, mails or emails you unsolicited and requests sensitive personal information such as your credit card number or your Social Security number, never divulge it, no matter how nice or legitimate the person sounds. Such requests are often financial scams targeting seniors. Criminals are trying to steal your money or make unauthorized use of your credit and good name. If you ever become the victim of identity theft, report it immediately to your local police department and to the Federal Trade Commission. You can reach the FTC toll-free at 877-ID-THEFT (877-438-4338) or atits website.
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Don't cosign for someone else's loans
To help maintain a healthy credit rating, you should check your credit reports free of charge at least once a year at thegovernment-mandated website. But a once-a-year checkup isn't enough. You should also routinely watch out for the warning signs that you may be in debt trouble. Some red flags include: being able to make only minimum payments, missing payments, charging without knowing how you will pay your bills, and constantly seeking zero percent card offers or low-rate balance transfers just to be able to afford your payments. If any of these warning signs sounds familiar, seek help from a trusted nonprofit credit-counseling agency.
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Istockphoto
Don't share your credit card number
If you don't pay a federal tax debt, the IRS has the power to levy your assets, seize your tax refund or put a lien against your property. But none of that should scare you into paying with a credit card. That's because if you do, you'll also have to pay an "interchange" fee. This can run anywhere from about 2 percent to 4 percent of the amount you're paying. Now add that to the 12 percent to 18 percent interest you'll pay to your bank if you add the tax charge to your card's balance. A better solution is to work out a repayment plan with the IRS and pay your tax debt over time.
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Simon Battensby/Getty Images
Don't be pressured into accepting new credit cards
- 10 common credit mistakes
- Bad spending habits you should break
- 10 ways to cut expenses
Get savings on a new car with the AARP Auto Buying Program
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Steve Lewis/Getty Images
Don't ignore the warning signs about credit problems
En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.
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Steven Puetzer/Getty Images
Don't fall for credit repair schemes
En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.
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Getty Images
Don't pay your tax bill with a credit card
En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.
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Walker and Walker/Getty Images
Don't put major expenses on credit just for "rewards."
En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.
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En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.
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FAQs
10 Common Credit Mistakes That Can Damage Your Financial Standing? ›
Not checking your credit score often enough, missing payments, taking on unnecessary credit and closing credit card accounts are just some of the common credit mistakes you can easily avoid.
What are 10 things you could do to hurt or even destroy your credit? ›- Getting a new cell phone. ...
- Not paying your parking tickets. ...
- Using a business credit card. ...
- Asking for a credit limit increase. ...
- Closing an unused credit card. ...
- Not using your credit cards. ...
- Using a debit card to rent a car. ...
- Opening an account at a new financial institution.
Not checking your credit score often enough, missing payments, taking on unnecessary credit and closing credit card accounts are just some of the common credit mistakes you can easily avoid.
What are the three most common credit mistakes? ›- Incorrect Accounts. One of the top mistakes seen on credit reports is incorrect accounts. ...
- Account Reporting Mistakes. Another common credit report bureau mistake is account reporting errors. ...
- Inaccurate Personal Information.
Not paying on time
Sometimes, schedules are busy and budgets are tight. But it's best to always pay at least part of your credit card bill on time. Missing or late credit card payments can have a big impact on your credit score and fees.
If you have bad credit, you might have more trouble taking out a credit card, car loan or mortgage — and if you do get accepted for a credit card or loan, you can expect to pay higher interest rates. A FICO score of less than 669 would be considered a fair score and one below 579 is rated a poor score.
What is the number one credit killing mistake? ›Mistake 1: Late payments.
What credit mistakes are the most serious? ›- Making late payments.
- Making only the minimum credit card payment each month.
- Maxing out your credit card.
- Misunderstanding introductory credit card interest rates.
- Not reviewing your credit card and bank statements in full each month.
- Closing a paid-off credit card account.
- Making a late payment.
- Having a high debt to credit utilization ratio.
- Applying for a lot of credit at once.
- Closing a credit card account.
- Stopping your credit-related activities for an extended period.
1. Payment History: 35% Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores. An account sent to collections, a foreclosure or a bankruptcy can have even deeper, longer-lasting consequences.
What not to say to a credit card company? ›
Don't Lie About Your Credit Card History
Customer service representatives can easily pull up your credit card history while you're on the phone, so there is no use in bending the truth.
- Forsaking Your Savings. ...
- Keeping the Same Spending Habits. ...
- Becoming Too Reliant on Your Credit Limit. ...
- Making Late Payments. ...
- Using Cash Advances. ...
- Carrying a Large High-Interest Balance.
- Errors made to your identity information (wrong name, phone number, address)
- Accounts belonging to another person with the same or a similar name as yours (mixing two consumers' information in a single file is called a mixed file)
- Incorrect accounts resulting from identity theft.
Most of your payment will go to paying interest. Since credit cards carry high interest rates, it can take a long time to pay off debt when only making the minimum payment. If you miss a credit card payment, then the bank can charge you interest on top of the original payment owed.
What three things should you avoid doing so your credit score won't be affected? ›- You Pay Your Bills Late. ...
- You Have Too Many Credit Cards. ...
- You Carry High Balances on Your Credit Cards. ...
- You Don't Have Any Credit Cards. ...
- You Close Old or Inactive Credit Cards. ...
- You Ask For a Higher Credit Limit. ...
- You Consolidate Debt Onto One Card.
Always Make Payments on Time
One of the most essential rules to owning a credit card is paying bills on time. A single late payment within a year of on-time payments might not seem to be much, but it could be a slippery slope that leads to debt and low credit scores and it will impact your credit.
- Paying credit or loan payments late. ...
- Spending to your credit limit. ...
- Racking up credit card debt early in life. ...
- Closing credit card accounts. ...
- Applying for new cards often. ...
- Ignoring or missing errors on your credit report. ...
- Bouncing checks.
- You have a high balance on your credit cards. ...
- A late payment was reported. ...
- You closed a credit card account or paid off a loan. ...
- You paid off an installment loan. ...
- You recently applied for credit. ...
- You're the victim of identity theft.