Four Credit Card Blunders That Hurt Your Credit Rating

It may seem very advantageous to have multiple credit cards and to have access to easy purchase 24/7, but they all come down to one thing: your ability to handle your finances. Credit cards allow you to purchase any items and avail lots of services but they all come with repayment dates, interest rates, and penalties for late payments. Whenever you fail to repay on time and exceed your credit limit, your credit card debt mounts up and it’s either you will have a hard time repaying or file bankruptcy.

All of these mishaps and all your transactions are recorded by lenders, banks, and credit bureaus. They keep track of what is called your credit history and this is used to assess your credit rating. Your credit rating will depend if you’re a good creditor or a delinquent payer. Having a high credit score gives you advantages such as quick approval of loans with lower interest rates, while having a low score makes for a denied one.

So if you think of fixing your credit rating by managing your credit cards, do so without making these mistakes:

Asking for a lower credit limit to lower your credit balance
This may be good for personal spending but a drastic change on this, especially when you still have outstanding balance on your credit card, would lower the difference between your credit limit and balance statement. In layman’s term, lenders give better points on your credit rating when you don’t always exceed the credit limit. If you want it lower, do so as long as you maintain at least a 30% gap between your balance and credit line.

Accruing big balances
It doesn’t matter even if you pay right on due date or you pay your balance in full each time. Credit bureaus don’t care. Your score is judged from your monthly statement, period. The bigger your credit balance, the lower your points. Keep your balance 30% lower against your credit limit.

Acquiring unvaried balance statement each month
You should avoid doing this on cards that don’t report consumer’s credit limit. In these cases, credit bureaus only assume your credit limit based on your highest credit balance. So if you’re monthly statement is always from $1000 to $1500, they will conclude that you always use up your credit limit.

Keeping a credit card dormant
If you have an existing credit card but have not used it for years, the account still shows up on your credit history but it isn’t included in your credit scoring. A valid account does not matter. An active one does. Use that credit card once in a while even on very small purchases and just pay it in full each month.