Your credit score is the all-important number that tells lenders everything they need to know about your relative financial health – whether it’s good or bad. If you’re hoping to make a big purchase, like a home or vehicle, you likely know how important a strong credit score will be. In fact, a less-than-stellar credit score can make or break your ability to qualify for a mortgage or auto loan, dashing your dreams in an instant. So, how do you keep your credit healthy? Start by avoiding these two very common – and very costly – credit mistakes.
Paying the Minimum Monthly Payment
Creditors often advertise the minimum monthly payment as a way to assure people they can afford to take out a loan or make a purchase on a credit card. However, if you want to achieve and maintain an excellent credit score, look for ways to pay down high-interest debts as quickly as possible. Paying the minimum payment on your credit accounts each month may meet legal standards and keep your accounts in good standing from a technical standpoint, but this costly move also keeps debts on your account years longer than recommended. Work to pay more than your minimum payment each month, doubling your payment whenever possible.
Opening Credit Accounts at Stores
Chances are, your favorite stores offer credit cards with fantastic perks, but having too many of these accounts can be tremendously harmful to your credit score. The higher the average age of your credit accounts, the higher your credit score. Opening new accounts lowers that average age, thereby hurting your credit. Remember to always work toward a long trend of positive credit history and think twice before signing up for new credit accounts that may impact your credit health for years to come.
Using credit is necessary in some situations, but it’s important to be savvy about it. Protect your credit score – and your ability to qualify for a future loan – by avoiding these common credit pitfalls.
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