Failing to handle your credit card debt accordingly can lead to one thing: that is bad credit. And this may further impair your ability to obtain financing when you need to. So, which are the main credit card mistakes you should avoid?
Making Minimum Credit Card Payments
This is a practice employed by most credit card users. And, at first glance, there doesn’t seem to be anything wrong with it. Still, hear us out. If you exclusively make minimum credit card payments, this will only increase the lifespan of the debt. Over the course of time, this means that you’ll end up paying a lot of money on interest fees and other additional costs. Hence, unless paying the minimum debt is part of your debt reduction strategy, you should try to increase your monthly credit card payments.
Making Late Payments
This is, perhaps, the second most commonly met practice that is likely to ruin your credit rating. Each licensed money lender frowns upon this. Not only that making late payments will expand the lifespan of your loan, but this also means that you’ll accumulate a lot of debt, especially in the form of additional fees and interest rate. So, make sure you don’t allow the due date to go past you. On the opposite, strive to make timely repayments.
Substituting Credit for Cash
Another habit contraindicated by every dependable licensed moneylender is substituting credit for cash. Many times, this happens because your cash flow might be clogged, or, perhaps you find credit cards to be more convenient. Nevertheless, if the reason why you constantly find yourself reaching for the credit card is that you are low on cash, this could only mean one thing: you need to make some serious lifestyle changes.
Closing an Old Account
Let’s say that you’ve finally made it: you managed to make repayments for a card with high interest rate, and you want to eliminate that from your credit history by closing the account. Nevertheless, while this could make you feel good on the spot, this is less likely to help you rebuild your credit.
As a matter of fact, each licensed moneylender outlines that closing an old account diminishes your available credit line, which instantly increases your debt-to-available-credit ratio. Alternatively, you should maintain the account open, while keeping that credit card out of sight – if it bothers you that much.
Applying for Numerous Credit Cards at Once
Did it ever occur to you that each credit card application sent out to a licensed money lender is likely to leave a mark on your credit score? As a matter of fact, if you send too many applications in a roughly short timeframe, you’ll observe an increase in rejections. That’s because this practice makes lenders more suspicious regarding your desperation to have an application approved.
To conclude, as long as you steer clear of these mistakes, you’ll be on the right path to coping with your credit card debt accordingly. If you have other handy tips on the topic, make sure you let us know!
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