![]() Unfortunately, you may regret your choices if you do eventually need to borrow money to finance a car or take out a mortgage to buy your own home. Personal finance advisor Dave Ramsey is notorious for telling consumers they shouldn’t use credit cards or borrow money no matter what, and his advice can absolutely help you steer clear of debt for the long haul if you follow it. Avoiding Credit Cards Because You “Hate Debt” Fortunately, you can check your credit reports from all three credit reporting agencies-Experian, Equifax, and TransUnion- once a week through April 2022, and after that once per year using the website. If you fail to do so, you could easily be a victim of theft and not find out for months or even years. The best way to know if you’re a victim of identity theft or fraud is to check your credit reports every year. “New account fraud” that takes place when someone opens an account with your private information grew to a $16.9 billion dollar crime in 2019, according to a 2020 report from Javelin Strategy. Identity theft is fairly common these days, and statistics show that an array of hacking strategies aimed at consumers are on the rise. Not Checking Your Credit Reports Each Year That way, your accounts can add to the average length of your credit history and available credit, which can only help your credit score over the long haul. Instead, consider keeping old credit card accounts open and put your cards somewhere for safekeeping. This is an important point to know and understand since it may seem like a good idea to close old accounts you don’t use regularly.Īlso be aware that closing old accounts can reduce the amount of available credit you have, thus boosting your utilization in the process. ![]() Closing Old Credit Card Accounts You No Longer UseĪnother factor that impacts your credit is the average length of your credit history, which plays a 15% role in your score. If you maintain balances higher than that in relation to your credit limits, you should fully expect your credit score to take a hit. This means that, if your total credit limit across all your credit cards is $10,000, you should never owe more than $2,500 to $3,000. What’s the best utilization rule? Credit reporting agency Experian says you should strive to keep your credit balances below 25% to 30% of your limits to achieve the best results. “That’s why it’s a good idea to keep low credit card balances and not overextend your credit utilization,” they report. What’s the problem? According to, credit score formulas see borrowers who constantly max out their cards as a potential risk. This can be a huge problem for your credit since the amounts you owe in relation to your credit limits, called credit utilization, make up 30% of your FICO score. Let’s say you pay your bills early every single month and never miss a payment, but you can’t help but rack up balances that continue growing every month. Here are some of the less common ways you could be hurting your credit score without realizing it. In some cases, however, there may be ways you’re hurting your score that aren’t entirely obvious. When you use credit responsibly (pay your bills on time, keep debt at a minimum, etc.), your score will likely improve, whereas your score could easily tank if you are reckless with your credit and your finances. A score of 579 or below, on the other hand, means you “are considered a poor credit risk and may be rejected,” notes .įortunately, you do have some control over your credit score and how it progresses over time. Where a very good credit score, or any FICO score of 740 or higher, will likely help you secure loans and credit cards with the best rates and terms, any score lower than that will likely cost you.įor example, a fair credit score of 580 to 669 will typically leave you paying more for credit-and that’s if you can get approved in the first place. It’s also a determinant of how much money you’ll spend on interest and fees over the course of your life. ![]() ![]() Your credit score is an important component of your overall financial health.
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