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Most of us typically make one or two mistakes with our credit cards at some point in our life, such as letting credit card debt build up or missing a payment. Many credit mistakes can be quickly and easily fixed, but others can cost you for a very long time. But with a little foresight and awareness, you can avoid these common credit mistakes and enjoy good financial status and peace of mind.
How often do you check your credit score? If it’s only once or twice a year, you could be missing something important that is ruining your good credit. And since most credit cards have a feature that enables you to see your credit score once a month, it really should be a regular habit.
Checking your credit score can let you see how you’re doing. If your score is going up, great! But if it’s going down, then you need to investigate why and see if it can be fixed. Sometimes it can be a simple error, but other times it can signal fraud or identity theft.
Everyone misses a payment now and then. And if you contact the credit card issuer and make the payment as soon as you notice, there is usually no problem — sometimes they even wave the late penalty fee as a courtesy. But if you miss a payment and allow it to go unpaid for more than 30 days, it can not only seriously harm your score, it will also stay on your credit report for seven years. Allowing missed payments to go unpaid for even longer will really harm your credit score and it can take several years to rebuild it.
Just making the minimum payment on your credit cards is a mistake that can haunt you financially for years. That’s because most of the minimum payment is only interest, leaving you with the bulk of the debt to continue to pay down. If you have substantial credit card debt, paying it off can take years, and you will have paid thousands more in interest over that time.
There’s nothing wrong with having a few credit cards, just as long as you don’t open a bunch of them at once. All those credit card inquiries will count against you and damage your credit score. It also makes you look like a riskier borrower to other lenders and creditors, which could hurt your chances of getting a loan in the future should you need one.
Sometimes it may be necessary to co-sign a loan for someone, such as your spouse or your child. But experts say that you should probably never co-sign a loan for a friend. That’s because you never know what your friend might really be like with credit, and you could wind up with a damaged credit score if your friend doesn’t make their payments. Even if they are good with credit, unexpected financial hardship could cause them to default on a loan, leaving you just a liable as they are.
Making more than the minimum, always paying your debts on time, and just generally being smart in how you use credit cards or take on additional debt will ensure that these common credit mistakes don’t happen to you.
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