4 Common Credit Mistakes to Avoid | Richard Banks & Associates, P.C.

On the journey to build up excellent credit or repair your credit, there are many common mistakes that can be easily avoided! To help you avoid these missteps, Richard Banks & Associates has compiled a list of mistakes to be watching out for.

Let’s take a look at four common credit mistakes to avoid:

1. Maxing out a credit card. Having a credit card and using it responsibly can be an excellent way to boost your credit. Unfortunately, that credit card turns into a double-edged sword if you charge it up to the credit limit. In the FICO Formula, credit card balances are in the “amounts owed” category, which makes up 30 percent of your score. While this obviously won’t tank your credit score, it can be responsible for knocking it down some points. A great rule of thumb to live by regarding your credit cards is to never charge more than you can pay off that same month.

2. Being late on a payment. Payment history is another factor that is taken into consideration on your credit score, making up 35 percent. If you are late on credit card payments month after month, it will reflect negatively on you and damage your score. On the flip side, paying your credit card bills on time can positively impact your credit score!

3. Applying for too many credit cards. It might be tempting to sign up for all those store cards to get an extra 20 or 25 percent off, but it also is not a good look for your credit score. Not only is there more temptation to charge numerous items or make frivolous purchases, but FICO has also found that consumers with six or more credit inquiries can be up to eight times more likely to declare bankruptcy.

4. Going delinquent on a loan. When you took out that loan, it signified a promise to the lender that you would pay it back. Late payments on a loan will appear on your credit report and could result in future lenders deeming you not “creditworthy.”

At Richard Banks & Associates P.C., we know that things can happen to make these credit mistakes a reality for you, but remember, we are here to help you get back on the right track. Contact us today and let’s right those mistakes!