There are many ways that consumers can either improve or chip away at their credit in the course of handling their finances, and often, the things that constitute bad habits can dramatically outnumber the good ones if you're not careful. For that reason, it's vitally important that you know some of the missteps you might be making without even realizing it, and how you can avoid them going forward.
Some of the things that can be most injurious to your credit standing could be issues that you've never even really considered as being all that bad. In some cases, you might even be under the misconception that these problematic habits are actually doing you some good. Many of the biggest credit mistakes consumers make, in fact, come as a result of the ways in which they use — and misuse — their credit cards every month.
Where credit card use can go wrong
Obviously, the ability to properly control all your credit card accounts is vital to being able to maintain a good credit score, and indeed, having and using these cards regularly can certainly be part of good credit habits overall. But these may also be the easiest to misuse simply because of how often you might use them in your daily life. For example, using your card to make all your everyday purchases doesn't necessarily mean you are handling your card improperly, but if it means you're spending more on your account than you can afford to pay back at the end of every month, you might eventually end up landing yourself into trouble.
Any balance you have left over at the end of the month will typically have interest charges applied to it, and the more you spend, the more quickly those obligations will grow. Usually, people with large amounts of credit card debt did not rack it all up in just a few purchases; instead it was typically the result of spending a little bit every day until the balances grew out of control. Large debts obviously come with big monthly bills, and the minimums on those can, at some point, start to become difficult to afford for even well-off borrowers.
Part of the problem with this habit is that some consumers may think, incorrectly, that having a lot of credit card debt is something lenders want to see, and thus helps improve your credit score. This popular myth, though, is actually the opposite of the case: Lenders only want to see you carrying 30 percent of your total combined credit limits from all your cards at any one time. That factor alone actually makes up 30 percent of your score, and any amount you owe over that relatively low threshold will start to reduce your ratings commensurately. That means the more you owe, the lower your score will probably be. If you've build up big balances over the course of several years, that means you might want to start making larger monthly payments, while simultaneously reducing or even cutting off your spending altogether, so that you can begin cutting into them.
What else you should avoid
This next factor, which makes up the single largest portion of your score at 35 percent, is probably most common with credit card accounts as well, but can also plague you on other credit types if you're not careful. Making a payment that's even one day late can, depending on the terms of your lending agreement, lower your scores by 100 points or more in one fell swoop, and thus you'll need to be extra careful to make sure this never happens to you. The problem with missing even one payment is that it can undo months or even years of hard work to maintain a good credit standing, and will take several months or more to fix, only through diligent on-time payments made into each and every one of your various accounts.
Of course, when you're trying to maintain as good a credit score as possible, you should also try to make sure that you're not being plagued by any potentially unfair markings which may appear on your credit reports. The only way to be sure this is not the case is to regularly order copies of these documents from each of the three major credit reporting bureaus throughout the year and checking them over closely to make sure everything is as it's supposed to be. If you discover any of these problematic entries, or even those you don't recognize, on your reports, you might want to work with a credit repair law firm. This may allow you to get them cleared up as quickly as possible, so that you can return your standing to where you deserve to be.