While splurging on car accessories for girls might be a fun daytrip to spend some extra money, it may not be a good idea to continue that practice if it means jeopardizing your emergency fund, paying off debt, funding your retirement account, and even more importantly, hurting your credit score which could be costing you hard-earned money each month, let alone what that could add up over the course of months or even years. If your credit score has not become a priority, that should be your next money move, as unnoticed, you could be spending much more than you have to when it comes to necessary monthly bills such as your mortgage, loans, credit cards, and could even cost you a potential job, as employers are even pulling credit scores.
Not Checking Your Credit Score
These days it can be out of your control of who’s hands your information may fall, so it’s best that you project yourself as best as you can. Whether your card information is taken when swiping your card at the gas pump, or when left out for too long when paying a restaurant or bar tab, not to mention have a store that you frequently shop at be compromised with your information, it’s a good idea to pull your credit report at least once a year to ensure all accounts are up to date and accurate. Then, with each credit card monthly statement you can view your credit score to make sure it continues to rise each month, so you’re able to spot any issues and take further action.
Using Credit Instead of Cash
While using credit does have its advantages, if you begin to spend more than you can afford it can lead to financial troubles pretty quickly. When it comes to spending money, if you try using cash instead of credit, at least this way you can spend what’s available to you and when it runs out, that’s it until the next paycheck. A lot of times we swipe and swipe, but maybe actually seeing the dollars leave your hands and go into the register will be enough incentive to watch your purchases.
One of the largest portions of your credit score has to do with payment history. Sure, you get a due date that your minimum payment is to be paid by, and even a day late could cost you a late fee and a spike in interest rate, but it’s when your account gets to be thirty days late is when your score will take a drastic dive. Scheduling your payments in advance, on or before the due date, is a great way to ensure payments are never missed.
Maxing Out Your Credit Limit
Probably just as important as payment history is the amount of debt you are currently carrying compared to your credit limit. As you increase your credit utilization by continuing to charge up your account without paying down the balance will cause your credit score to continue to fall. If you are able to keep your balance low by paying off each month, you could see credit line increase, which can actually start to improve your credit score because it would decrease your overall credit utilization.
Only Making the Minimum Payment
When you receive your credit card statement, there will be a statement balance and a minimum payment to make by the due date. By making this minimum payment it will satisfy your account for the month, but it will do little to reducing the balance if you’re not making a large payment to really chip away the balance. Depending on the card you could be looking at upwards of 16% APR, so as the balance increases you can really see a huge interest charge that could put a significant dent in your budget, jeopardizing other areas where your finances are a greater concern.
Closing a Zero Balance Account
Whether you have been in debt trouble for a while or are paying off a large statement balance before interest kicks in, seeing that zero balance can be a huge sign of relief, and it should be, as being debt-free is the ultimate, so it should be reason for celebration. One reaction you may have when first getting out of debt is closing that zero-balance account, but actually you may want to hold off on that, cut up the card, but keep the account open, as closing that account will take away from your overall available credit and could end up reducing your credit score if you have a balance on other cards.