Behaviors That Can Hurt Your Credit Score Living
Credit plays a vital role in helping people achieve their personal and financial goals. A good credit score can help people qualify for great mortgage terms, ultimately paving the way for them to move into their dream home.
A strong credit history can also help consumers gain benefits, and young people who learn to use credit wisely can avoid potentially expensive interest charges that tend to hamper the financial freedom of many young adults.
Many consumers find it difficult to manage their credit. According to FICO, a data analytics company that developed the FICO score that many lenders use to determine consumer credit risk, more than 10% of consumers in the United States have credit scores below 550. Anything less than 550 is considered very low.
No two consumers are the same, but many of them who struggle to build a good credit history can engage in certain behaviors that can hurt their credit rating.
Take too many lines of credit
Consumers who don’t have a lot of experience managing their finances, such as students and young adults, often find it difficult to resist offers of credit.
Retailers can offer significant discounts at payment counters to shoppers wishing to sign up for in-store credit cards. Inexperienced consumers may not recognize that these cards often come with inflated interest rates, especially compared to more user-friendly cards.
Avoid opening too many credit accounts as this can hurt your credit score and make it easy for you to lose track of spending.
Allow interest charges to accumulate
Paying interest on consumer debt like credit cards won’t help consumers improve their credit scores, so pay off the balances immediately. This is easier to do if you only have one or two lines of credit that you monitor regularly.
Use credit for daily purchases
Credit is not cash in your pocket, nor is money withdrawn directly from a checking or savings account, which is the case when you use a debit card.
This makes it easy for consumers to lose track of their daily expenses if they are spending those expenses with a credit card.
Balances can quickly accumulate and, if they cannot be repaid in full when the bill is due, interest charges will begin to accumulate. This trap can be avoided if consumers commit to using credit only in emergency situations or when buying expensive items that they know they can pay off when the card bill is due. credit.
Not monitoring credit score
It’s now easier than ever for consumers to track their credit scores. In fact, many credit card companies provide free monthly updates to cardholders, who won’t have to lift a finger to see if their scores have improved or deteriorated over the past 30 days.
Consumers should take advantage of this relatively new benefit in order to see how their use of credit affects their overall scores. They can then use this knowledge to improve their scores in the future.