Credit Card Mistakes Are Destroying Your Credit Score; Here’s How to Turn Them Around

If you find you’re making a number of credit-eroding mistakes, you may think it’s a good idea to cut up the credit cards. That said, by doing so, you’ll forego the many benefits and perks, including building credit, that come with responsible card usage. Indeed, those who can’t stop maxing out their credit cards may wish to use debit instead of credit, at least until they’ve committed to changing their behavior.

In any case, I believe the best thing to do if you’re making more than one credit card mistake is to correct them at their root cause. Indeed, it is not credit cards that destroy wealth; it is the poor financial hygiene of users who make these mistakes.

As you may know, I’m no fan of ditching credit cards for debit. By doing so, you’ll forego purchase protections, points (or cash back), the credit boost (if you pay off that bill on time!), and maybe even exclusive access to those airport lounges.

Either way, here are a few quick and easy ways that credit card users can swipe to jolt their scores rather than deteriorate them. For many young people, credit scores are important not just for getting approval (and a low rate) on a loan, but for the apartment and job search. Undoubtedly, a good credit score is more important than you’d think.

Now, that doesn’t mean you need a perfect score or one that’s in the 25th percentile, as that would grant you diminishing returns after a certain credit score is surpassed. But you should aim to achieve a score that’s good, something that isn’t as hard to do as you think.

Late payments

Late payments are one of the biggest credit score killers. Undoubtedly, those who swipe too much and pay no attention to their budgets tend to be the ones on the ropes at the end of any given month as the credit card statement becomes due.

Indeed, it’s easy to worry about the matter later on when you’re at the shopping mall and you just have to have a certain good. In any case, buying something you can’t afford can be the formula for a double-digit figure sliced right off your current score.

Of course, sticking with a budget is key here. And for those who do stay within their budgets, perhaps forgetting about a statement is an easy-to-forgive issue that’s addressable by setting up automatic payments. That way, you won’t need to think about it.

Making minimum payments

Making the minimum payment may suffice for some in any given month, but in addition to weighing on your credit score, you’ll also be on the hook for obscenely high interest rates on outstanding balances.

The best move one can make is to pay off one’s statement in full and on time. That way, you’ll get an uplifting effect on your credit without having to dig deeper into your wallet to pay interest. Indeed, avoiding the one-two hit to the chin is often the best move.

Maxing out your credit card

Just because you have room to spend more with your card doesn’t mean you should max it out or boast a high “utilization rate.” Indeed, it’s a rule of thumb to keep your utilization rate comfortably below the 30% mark. So, if you’ve got a $10,000 limit on a card, shoot to keep the monthly amount due at $3,000 or less.

At the same time, you don’t want it to fall to zero either, as it’ll give the impression you don’t really use your card as much. For many, keeping it in the single digit percentage is a good place to be in if you’re shooting for a better credit score. And finally, the higher your credit card limit, the easier it’ll be to sustain a lower utilization rate.

If you’ve got a $20,000 limit on a card, having $6,000 in debt would put you at that 30% utilization level. Though I wouldn’t request a limit increase unless you’re willing to take a near-term credit hit, accepting such limit increases can be good for you, provided you’re not going to increase your spending accordingly.

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