Credit cards and loans can be wonderful tools, but they can hurt you if you don’t use them properly. The following are some of the most common mistakes that people make with loans and cards and some tips on how to avoid them:
Maxing Out Credit Cards
One of the top mistakes that people make in the credit world is maxing out the credit cards. It may seem great to have all that available credit, but using it all at once is highly detrimental to the credit score and can knock a person from “good” to “bad” within days. The best rule-of-thumb advice for that is never to spend more than 29 percent of the available balance. That way, you can show use and repayment but not irresponsible behavior.
Only Making Minimum Payments
Paying your credit card bill on time is a great idea, but you need to take it a step further. In other words, only paying the minimum payment won’t put a dent in your debt the way it’s supposed to. It will drag the payment on forever, and it will rack up more interest than you probably want to pay. You can do yourself a huge favor by doubling up every month. You’ll see your credit score rise faster, and you’ll get your debt cleared away.