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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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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 AlsoApplying for a mortgage after a foreclosureHow to Get a Debt Consolidation Loan With Bad Credit - NerdWallet4 steps you can take now to help you clean up your credit reportWhat Happened to Equal Credit Opportunity for All?
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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.
Paying in full and on time can save you from interest fees and hits to your credit score. Overspending, earning the wrong type of rewards and not monitoring your transactions or credit score are a few mistakes to avoid.
What are 5 things that can hurt your credit score? ›- 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.
- Your payment history (35 percent) ...
- Amounts owed (30 percent) ...
- Length of your credit history (15 percent) ...
- Your credit mix (10 percent) ...
- Any new credit (10 percent)
You Have Too Many Credit Cards
Keeping too many credit cards open at one time can be problematic, even if you pay each of them off monthly. “Having too many cards can negatively impact both your credit score and your ability to borrow money,” said Julie Pukas, head of commercial product integration at TD Bank.
- Late or missed payments.
- Collection accounts.
- Account balances are too high.
- The balance you have on revolving accounts, such as credit cards, is too close to the credit limit.
- Your credit history is too short.
- You have too many accounts with balances.
- Bad Credit Means Trouble Getting a Loan.
- Fewer Renting Options.
- Higher Insurance Costs.
- Paying a Deposit for Utilities.
- Difficulty Landing a Job.
- FAQs.
- The Bottom Line.
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.
Three common credit problems are: Lack of enough credit history. Denied credit application. Fraud and identity theft.
What is the number 1 rule of using credit cards? ›Pay your balance every month
Paying the balance in full has great benefits. If you wait to pay the balance or only make the minimum payment it accrues interest. If you let this continue it can potentially get out of hand and lead to debt. Missing a payment can not only accrue interest but hurt your credit score.
Is there a chance that your credit card company will make a mistake on your statement if you don't check your charges? Mistakes are common, so always check your statements every month, I have also found double charges for same purchase more than a few times, so check and recheck your statements.
What is the most common problem experienced by credit card holders? ›Missing payments is one of the most problematic and easily correctable issues facing credit card users.
How to hurt your credit score? ›- Making Late Payments. ...
- Using Too Much Credit. ...
- Applying for Too Many Credit Accounts. ...
- Closing Credit Accounts. ...
- Having Your Credit Limit Lowered. ...
- Defaulting on a Loan. ...
- Cosigning on a Loan That Becomes Delinquent. ...
- Accounts in Collections.
- 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.
- Pay as much as you can toward your debt. When it comes to avoiding credit card debt, your top priority is generally to pay off as much of your balance as possible each month. ...
- Track your spending. ...
- Save for emergencies. ...
- Keep an eye on your credit scores.
Because payment history accounts for such a large part of your score, any late payments on your history cause the biggest damage to your score. You can also destroy your credit by amassing massive piles of debt. At worst, you'll have to file for bankruptcy if you can't pay the debt off, which will ruin your credit.