Christmas is around the corner and many of us will have turned to the credit card to help cover the cost.
If you’ve applied for credit to get you through Christmas you should know exactly what you’re dealing with in order to stay away from common mistakes.
In this short guide I’ll explain what you need to stay clear of if you want to protect and increase your credit rating and credit worthiness.
Making the minimum payment
Making the minimum payment is the least cost effective way to run your credit card.
It takes longer to pay back what you owe and the interest payments really stack up.
If you’ve took a card with an interest free period then you can afford to take your time a bit, if not, you need to pay it off as quickly and as cheaply as possible.
Pay late and you can expect more charges to be added to your account.
It may also appear on your credit file which other lenders can see.
Set reminder to make sure you don’t miss your due date, better still set up a DD that is more than the minimum amount.
Giving access to a third party
Trust your card in the hands of someone else and you run the risk of them getting you into unnecessary debt.
When all is said and done, the card is in your name and you’re responsible for the bill whether you spent it or not.
Always act on the side of caution if you do hand it over to someone else, personally I would NEVER give my card to anyone.
Ignoring your statement
If you haven’t set up a Direct Debit and you ignore your statements you could miss your bill due date.
Checking your statement would also alert you to any suspicious activity on your card.
Always read your statements and check the charges thoroughly to be certain they all add up.
Allowing your credit card to get charged-off
This is one of the worse things you can allow to happen to your credit report and WILL damage your credit score and credit worthiness.
The charge-of listing (default) will stay on your credit file for 6 years from the date you settled it and will be available for any future lenders to see.
Usually it will take around 6 months of missed payments to get a charge-off status on your credit file, so take care of them before it reaches that point.
Lenders are far more reasonable when you make the effort to contact them yourself, rather than them chasing you.
Not reporting your credit card lost or stolen
Goes without saying really doesn’t it?
The longer you take to report your card lost or stolen, the longer that thieving git has to spend on your card.
You could be held liable for the charges if you fail to alert your provider.
Maxing out your balance
Using more than 25% of your credit card balance is harmful to your credit score.
Getting close to your credit limit also heightens the risk of you going over your agreed credit limit and incurring penalty fees.
Closing down your accounts
Canceling unused credit card accounts lowers your credit utilization, which can have an adverse effect on your credit score.
See the ‘related article’ above for more information on how that affects your credit score.
Making too many credit card applications at once
Every time you make an application for credit a footprint is left on your credit file.
Making a series of applications can make you appear desperate to lender and too much of a risk to take on.
You also lose points off your credit score just for applying, so don’t do it!
Failing to understand the terms and conditions
Taking time to understand the terms and conditions of your credit agreement will ensure you know how your lender operates in terms of interest rates and late charges etc.
Having this information encourages you to pay on time and keeps you in control of your costs.
It gives you the knowledge to know how you should and shouldn’t use your card and how they will react if you don’t.
Review them every 6 months, and keep an eye on your mail for nay changes your provider may make.
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