Credit Mistakes to Avoid

Many people in the United States today use credit cards almost daily. Similar to payday loans or cash advances, credit cards are cards used when you do not have the money to pay for whatever you are buying right at that moment.

Credit Cards, Friend or Foe?

Many people believe credit cards are a great resource, and they are, especially when used correctly. Most people are very grateful that credit cards exist when they do not have to have all the money right now for something they want to buy.

However, there are many people who see a lot of problems with credit cards. They believe that being able to buy things without physically having the money to buy those things usually only creates problems for people.

Indeed, credit cards do cause problems for many, many people. People get credit cards and then spend ridiculous amounts, thinking that somehow they’ll just pay it off later.

Many times, though, people cannot pay off their debts later. It may not seem like a big deal, but being late on payments really destroys your credit score.

The Importance of Credit Scores

Credit score may not seem important, but it is very important. When you are trying to take out a loan or do something significant financially, institutions will look at your credit score in great detail.

They will see that you have a history of making payments late, or not making at them. This will make them very wary of entering into any financial contract with you.

This is why, if you have a credit card, paying your payments on time is so crucial. Your credit score could really ruin your financial future.

There are several other mistakes you can make when you have a credit card. Many people do not even know about these mistakes, or that they are even mistakes.

Closing Accounts? Not So Fast.

One of the biggest mistakes you can make is to start closing down credit accounts. Many people do this when they are trying to improve their credit score and get out of debt.
When you cancel an account, everything may seem fine. But you may feel the repercussions of doing this 10 years or more down the road.

Basically, if you have any good credit associated with that account, you will lose it after 10 years if you cancel that account. Even if you have bad credit, it is still better to keep an account with good credit open so that it helps your credit score at least a little bit.

If you choose to cancel your account, you will lose whatever good credit was associated with that account after 10 years. The overall length of your credit history will decline greatly, and your credit score will most likely go down.

This is not good. The best way to avoid this is to not cancel your accounts, unless they are doing absolutely nothing for you.

Available Credit is a Good Thing!

One of the ways that the major credit bureaus calculate credit score is by asking how much of your credit do you actually use. If you use less of your credit, then your score will be higher.

There are times when you could cancel one or more of your accounts. You should probably cancel your account when you find another account that has a lower rate, or better rewards, than closing your account might be a good idea.

Here are a few guidelines to know when to close one of your accounts. Make sure that you don’t close the card that you’ve had the longest, or the card with the highest credit limits.
It also important to try not to close the card that has the lowest interest rate and fees. Keeping these cards open should help your credit score now and in the future.
Try to think about when you are closing your card as well. Some times are better than others to close a card.

Don’t close a card immediately before you apply for a loan. This will not be good for your credit score.

And it will most likely cost you in higher interest payments. Try not to close the card until after your loan is approved.

This is going to be the wisest and the best choice for you and your credit score. The next thing you will want to do is try to negotiate a higher credit limit on your remaining cards.
You will definitely want to be careful with doing this, though, because sometimes credit card companies do not do or accept this from their customers. If you are considering closing one of your accounts, you should try your hardest to pay off the remaining balances on your other cards.

This will help improve your credit score, despite the cancellation of a card.

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