Managing Credit
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How to avoid bad habits that can wreck credit



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"How to avoid bad habits that can wreck credit"
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Credit has become a central part of everyone's personal finances. These days, it is important to maintain good credit standings, or it could lead to a lot of headache. Problems people face due to bad credit include loans being denied, being given higher interest rates and also increased insurance premiums.

Bad credit can even impact your application for a coveted job you are hoping to get, as employers are looking at credit reports. If you want the job, you'll likely need the competitive edge of having established good credit.

That being said, you'll want to keep good credit standings in order to avoid these kinds of hassles. What can you do? The best way to keep a solid credit rating is to keep yourself in check and avoid the bad habits that can drag your credit down.

Charging all your purchases

In today's digital society, plastic is encouraged. People use it for everything from major purchases to picking up a cup of coffee at a local Starbucks. However, these charges quickly add up, and come the month's, end you might find you can't pay your bill.

If you find you are carrying over balances and your credit card bills are spiraling beyond your budget, it's time to make changes in your spending habits. Use cash when you can, and budget your purchases so you don't overspend on unnecessary items. If you are not keeping track of your purchases, start doing so. Credit.com recommends checking your accounts frequently, so you haven't overspent by the month's end and can afford to pay your bill.

Applying too frequently for credit

According to Credit.com, too many credit inquiries can drag down your score. Many credit card companies, and retailers, often try to entice consumers to special offers or deals that are given on credit. There may be financial incentives offered or some other carrot offered, such no interest for six months, to convince you to apply.

Instead, find a couple of good credit cards that meet your needs, and stick to it. According to experts, the average American has about three cards. Only apply for credit when it is absolutely necessary.

Carrying too much credit

While the number of credit cards you have may not necessarily drag down your credit score, the amount of debt you carry can. Your debt-to-credit ratio directly impacts your credit rating. Freescore.com notes it is important to keep this ratio at, or below, 35 percent of your total available credit.

Avoid making minimum payments and keep your balances low, or better yet at zero, each month. Accumulating too much debt will not only result in high interest amounts being accrued, it will also negatively impact your credit rating.

Making late payments

Late payments are another bad habit that can ruin your credit score. According to CNN, late payments can shave your credit score by up to 110 points. If you have a basket or pile of bills that is not organized and you find you often miss due dates, it's time to change your accounting habits. 

Set up a filing system, organized by due date, and make sure your payments are on time. Even better, if possible, some experts suggest paying your bill as soon as it arrives.

Bad credit can have a direct impact on your life. However, by avoiding the pitfalls that can ruin your credit, you can keep your rating in good standing.

Related reading:

How loans affect your credit score, by A.W. Berry
Lesser known Ways to Lower your Credit Score, by Philip Melton

More about this author: Leigh Goessl

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