Credit is so simple but so confusing. But hey, we can only play by the rules were given. Because of this gray area there is so much contradicting information. In this blog we will go over some common mistakes people make with credit cards.
Mistake 1 is not having any credit cards at all. This makes up about 1/3 of your credit score. So credit cards are pretty important. Where I’m from, and the way I grew up, we pay cash. We don’t use credit at all. But that was a mistake and hurt me when I was older trying to buy my first home. So, get a credit card.
Mistake 2 not know how to use the card. Keep your balance under 35%. I tell clients 30% to stay on the safe side. Anything above that and they start looking at you as a risk. To do the math on this, find out how much your available limit. Multiply by .3, whatever you get is how much you’re allowed to spend.
Mistake 3 closing old credit cards. When you close a credit card you lose all that credit history which, in return lowers your credit score. Especially if you don’t have anything to balance it out. You also lose that available credit. So, your debt to income ratio is now changed. If you had $5000 in credit cards and close one card now you only have $3000 in credit which will lower your credit score. You don’t want to close a card unless you have to. There are strategies to make money from credit cards which we will get into later.
If you follow these three strategies credit cards will help your score. If you do not follow these three strategies, they will hurt you. Every thing you don’t know, someone is using it against you and you don’t even know it. So, educate yourself, these are simple and common mistakes people make. Don’t be one of them.
During your life, never stop dreaming. No one can take away your dreams.