subject: Credit Card Practices: 911 [print this page] Maybe this comes as not too much of a surprise, but an alarming rate of people that have credit cards have made one of these five mistakes at one time or another, throughout the history of their credit card financial records. By having and continuing these sorts of mistakes can hike up higher interest rates, gather unnecessary fees and in the end, creating negative credit history.
Some of these useful tips may help you curb the negative credit history, but it cannot be guaranteed unless people take responsibility for both ownership and action of their credit problems. Whether or not there have been mistakes made towards the credit card, here are some suggestions to watch out for, so that mistakes can be avoided for the future.
Never miss a payment. Perhaps this is the most important suggestion that anybody can give you. By missing a payment not only leaves the card holder is at risk to higher interest rates, it can also lead to fewer offers from the credit card company in the future. For every missed or late payment, creates a negative mark in the credit history. Because of the bad credit history that is created, the slope will become uphill and slippery to climb.
Remember your parents, or even your grandparents telling you that you must pay off your credit card balance in full at the end of every month? Well they actually gave great advice, because by carrying a can lead to credit card debt, a lower FICO score and a negative credit history with the company. A portion of the FICO score is calculated using methods that calculate the amount of debt, to the amount of available credit. Those with multiple credit cards, close to the credit line are considered to be high risk and offered higher credit card interest rates and fewer credit card offers.
Going over the credit limit is also a very bad mistake. By going over one's credit limit is most likely the worst thing that some people may do to their overall credit score. This places a person, according to the credit bureau as an even a higher. There maybe times that things get rough, financially, but this should not be the sole reason for going over the credit limit. Because the limit has beyond its boundaries, this will reflect in the credit bureau very badly. Even though the initial intentions may be getting one out of a loop; to the creditors, it looks like your finances are out of control. Not only that your may be heading to financial troubles, you may be going into serious debt and in the end your FICO score and your credit history in the credit bureau may suffer greatly.
Many people make this common mistake by opening too many accounts in a short period of time. Just because you have been accepted for a credit card, should not mean to try and get many more credit cards. Every time a lender or a financial business makes an inquiry it affects a small portion of the credit score that is accounted for inquiries into the credit file. Investigations are made when companies are assessing credit worthiness, multiple inquiries should be avoided when possible as they not only reduce the score, but decrease the history that the accounts have been opened.
In contrast, closing credit card accounts can be quite damaging to the credit score as they decrease the history that comes with using credit. The history that is created with credit card companies reports for a portion of the credit score. Because a longer established history with a credit card is much better record for your credit history. By wiping this long history, credit companies have little to look at, and note that the longest credit card that you held is gone often sends warning alarms. Here is a great suggestion...Rather than closing the account; store the credit card in a safety deposit box with a zero balance. Not only can it reduce the amount the credit card being used, it protects your zero balance. The only time you will have to put some money on it, is the usual fees that this card may have.
The last thing that people make a mistake is to accept a high interest rate when they are accepted for a credit card. Once accepted for a credit card; if a person knows his/her credit history can in fact negotiate with the credit card company for a lower interest rate. Credit card companies, like many other companies are able to negotiate interest rates based on a variety of factors, including; credit history, history with the credit card company, the actual FICO score and of course, the risk factors associated with the account. Credit card companies often have three tiers of interest rates, therefore most of the time, there is always a lower option.
A credit card is a financial responsibility that should not be taken lightly. People often go nuts once they are accepted for a credit card and something goes seriously wrong down the road, thus making the entire credit experience a bitter sweet experience. It is often urged that people who have credit cards, or is new person in the world of credit should take a step back and analyze themselves before going out there and spend, spend, spend. In the very end, you can put unnecessary stress unto yourself that can damage your credit history and FICO score that can be hard to fix.
