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Top 5 Mistakes Youngsters Make that Affect their Credit Score



Top 5 Mistakes Youngsters Make that Affect their Credit Score

“The more you learn about the different factors that affect your credit score and the ways they can be affected, the more likely you are to reach your financial goals.”

Credit cards are a tool that could give you many benefits, such as making online purchases more secure, enjoying rewards, and the opportunity to prove to lenders that they can lend you more money.

However; it is not easy to handle money and not everyone has the skill to manage it well. If a person is not careful, it can slip like water through the fingers before he knows it.

Your credit score is one of the most important indicators of your financial health, for this reason, it is crucial to develop good credit habits to build and maintain a good credit history.

Having a credit card can be a practical and easy way to have money at hand and solve many problems; nonetheless, it can become troublesome, especially for young adults, if it is considered as additional income and used without responsibility.


Credit cards are a tool that could give you many benefits, such as making online purchases more secure, enjoying rewards, and the opportunity to prove to lenders that they can lend you more money.

However, if you make the following mistakes, credit cards could come back to haunt you and put your finances in jeopardy.

#1 Delayed Card Payments

Payment history has a big impact on your credit score, so not paying on time or simply not paying will affect your credit.

And as a matter of fact, a single late credit card payment boils down to the high probability of decreasing your credit score by as much as 100 points or more.

Consequently, you can face difficulty when getting new credit cards/loans when needed.

If you receive a notification of a late payment on your credit report, it will remain on your report for at least seven years and would make it tough for you to manage your expenses via your credit card. In addition, you may be charged late fees.

#2 Paying Only the Minimum Amount

This is the worst thing you can do if you have credit card debt, as it will do almost nothing to lower your balance.

Also, if you continue to use the card, this minimum payment will increase, so you will be wasting more and more money.

This is because paying only the minimum increases the credit utilization rate, which is the total percentage of your credit that is being used.

Be mindful of the fact that the lower the utilization, the better as if you use more than 30% of your credit, it could lower your credit score.

If you want to pay off your credit cards in order to lower your utilization rate, you can apply for a personal loan. This way you will have only 1 monthly payment and a credit card, at zero.

#3 Cancel/Close Credit Accounts, Abruptly

If you feel like you have too many cards and now you want to just cancel them, maybe you should think twice.

Remember that canceling credit cards often affect your credit utilization, which is a measure of how much available credit you’re using.

So when you cancel cards, you end up with less credit available to you, and your credit utilization increases, which could hurt your credit scores.

Taking this into account, it is best to have willpower and start using a single card, but without canceling the others.

Furthermore, if you close a credit card account that has a good standing state, the history can remain on your credit reports for up to 10 years.

So as per the credit utilization percentage, when you close a card you lose the amount of credit available, and therefore the total credit utilization increases.

That said, if you don’t owe anything on your credit cards, stick with it so your credit utilization rate stays low.

#4 Apply for a New Card Too Often

Whenever you apply for a new credit card, a thorough investigation is run by the issuing bank on your credit report before making you eligible for owning another card.

Also, keep in mind that by the time banks do a lot of deep inquiries into your credit report, it’s telling lenders that you’re looking for new lines of credit probably because you can no longer finance your lifestyle.

Bank has methods to find a person details just by their name, phone number or address. So trying to cheat the system will not work for you.

That is, they could assume that you have too many expenses, which will make them doubt your ability to pay them.

#5 Taking Credit When You Don’t Need It

Let’s say you take out student loans, personal loans, auto loans, and mortgages, and increase your use of your credit cards.

These actions make it more difficult to keep up with monthly payments, increasing the possibility that you will not be able to pay one in a month.

It will also increase your credit utilization ratio, which could proportionally put an unfavorable impact on your credit score, especially on credit cards.

So to stop thinning yourself financially and getting yourself buried under bank debts, apply for credit when you need it genuinely and avoid paying unnecessary interest charges or late fees (in case of late payments).

Credit cards are of great help, but to use them responsibly it is important to take into account the payment dates and avoid the minimum payment, among other points.

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