Most people have heard that they should be careful with the credit. However, when it comes to the dos and don’ts of credit, most people have no idea what to do. Here are some tips to help avoid mistakes with your credit:
1. Cancelling old credit cards. 15% of your credit score comes from the length of your credit history. If you want to reduce the number of credit cards you have, then you should cancel the newest ones first.
2. Staying current on some or most of your cards. 35% of your score is based on punctuality of your payment, with only payments that are more than thirty days late affecting your score. If you’re going to be late on any cards, make up that payment before it is thirty days late. Juggle the timing of your payments, but make sure no payment gets more than 30 days late.
3. Having too many open lines of credit. 10% of your score comes from the types of credit used. If you have a lot of sources of revolving credit, such as credit cards, you can be seen as a credit risk. Why? Because you have the potential of racking up a lot of debt very quickly. Don’t take those retail credit cards just to save 10% or 15% on the first purchase.
4. Maxing out your credit cards. 30% of your score comes from the ratio of your credit card debt and your credit limits. Therefore, if all of your cards are used to the credit limit, your credit score is suffering even if you are able to keep up with the payments. Stop buying more and start using the money to make extra payments and pay down your credit.
5. Avoiding loans and debts. In the eyes of your credit report, having no debt is basically having bad debt. If you do not want credit cards, you should still consider getting one card and making an occasional purchase with it. Pay it off when the bill comes. It is bad to not run up any debt.