5 Common Credit Mistakes That Can Cost You Hundreds of Dollars

Are you making any of the 5 common credit mistakes that can cost you hundreds of dollars? In this article, we’ll explore these mistakes and provide tips on how to avoid them.

Not Checking Your Credit Report Regularly

The first common credit mistake is not checking your credit report regularly. Your credit report is a summary of your credit history, including your credit accounts, payment history, and other important information. It’s important to check your credit report regularly to ensure that there are no errors or fraudulent accounts.

Why It’s Important to Check Your Credit Report

Checking your credit report regularly can help you detect and correct errors. It can also help you detect fraudulent accounts that may have been opened in your name without your knowledge. Catching these errors and fraud early can save you money and protect your credit score.

How to Get Your Free Credit Report

You’re entitled to a free credit report every year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can obtain your free credit report by visiting AnnualCreditReport.com.

How to Read and Understand Your Credit Report

Your credit report can be difficult to read and understand. It’s important to review it carefully and understand the information it contains. You should review your personal information, credit accounts, payment history, and any negative items. If you find any errors or fraudulent accounts, you should dispute them with the credit bureau.

Maxing Out Your Credit Cards

The second common credit mistake is maxing out your credit cards. Your credit utilization, or the amount of credit you’re using compared to your credit limit, is an important factor in your credit score. Maxing out your credit cards can hurt your credit score and result in higher interest charges.

What is Credit Utilization?

Credit utilization is the amount of credit you’re using compared to your credit limit. For example, if you have a credit limit of $10,000 and you have a balance of $5,000, your credit utilization is 50%.

Why Maxing Out Your Credit Cards is a Bad Idea

Maxing out your credit cards can hurt your credit score by increasing your credit utilization. High credit utilization can also result in higher interest charges. Keeping your credit utilization low can improve your credit score and save you money in interest charges.

How to Keep Your Credit Utilization Low

To keep your credit utilization low, you can make multiple payments throughout the month, increase your credit limit, or use your credit cards sparingly. Making multiple payments throughout the month can reduce your balance and lower your credit utilization. Increasing your credit limit can also lower your credit utilization, but be careful not to increase your spending. Using your credit cards sparingly can also help you keep your credit utilization low.

Paying Only the Minimum Balance

The third common credit mistake is paying only the minimum balance on your credit cards. The minimum balance is the minimum amount you’re required to pay each month to keep your account current. However, paying only the minimum balance can result in higher interest charges and a longer repayment period.

What is the Minimum Balance?

The minimum balance is the minimum amount you’re required to pay each month to keep your account current. This amount is typically a percentage of your balance.

Why Paying Only the Minimum Balance is a Bad Idea

Paying only the minimum balance mostly pays interest charges, which means your balance will take longer to pay off. Paying only the minimum balance also extends your repayment period, which means you’ll pay more in interest charges over the life of your account.

How to Pay More Than the Minimum Balance

To pay more than the minimum balance, you can set up automatic payments for a higher amount or make manual payments throughout the month. By paying more than the minimum balance, you’ll reduce your balance faster and save money in interest charges