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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 AlsoWhat Is A Credit Score And How Is It Calculated? | New Horizon9 Credit Score Mistakes That You Can Fix Yourself - Cade HildrethA Complete Guide to Your Credit Score — Mindfully Money | Money Expert and Financial CoachPart 2: How to Fix Your Credit the Bad Ass Way!
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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.
Making late payments
One of the easiest credit card mistakes to fall into is making a late payment.
Paying bills late is by far the biggest drag on your credit. Payment history determines 35% of your FICO score, and for good reason. If someone has failed to pay their bills on time in the past, they will probably continue to do so.
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.
- 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.
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 is an example of a way to ruin your credit score? ›You Pay Your Bills Late
While missing a payment by just a few days likely won't put your scores at risk, paying bills 30 or more days late can have a serious effect on your credit.
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 are 2 types of inaccuracies that may be found on a credit report? ›Common Credit Report Errors to Look For
Incorrect personal information/identity errors: Your name may be misspelled, or someone with a similar name may show up on your account. Your report may show other personal identification errors, such as an incorrect address, birthdate, or Social Security number.
Credit report errors can include the wrong name or address on an account or an incorrect date you made a payment. Learn from the Consumer Financial Protection Bureau (CFPB) about the common types of credit reporting errors.
How long do credit mistakes last? ›Under the provisions of the Fair Credit Reporting Act, adverse information—for example, collection actions, charge-offs, suits, and judgments—may remain on your credit report for seven years.
How do you destroy 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.
- 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.