Everybody makes financial mistakes, but when you keep making those mistakes over and over again without correcting the behavior, you’re creating bad habits that can keep you from having good credit in the future. A missed payment here or there isn’t the end of the world, but you’ll want to show you’re responsible to credit card issuers in order to prove to them that you can be trusted with cards that have better interest rates, better rewards, and higher spending limits. If you feel the pressure of credit card debt payments mounting from month to month, try to identify these must-break habits of credit card users with poor credit in yourself so that you can make a change.
Ignoring the Signs
You have to be out of your mind to think that the old adage “out of sight, out of mind” can benefit you when it comes to your credit. Not paying attention to your credit card balance on a daily basis is irresponsible and will not help to keep your other bad credit card habits at bay. To help in this regard, most modern financial institutions nowadays offer smartphone apps that can help you track your spending and alert you whenever your card is charged or a certain payment threshold is met. Banks have similar systems in place to track usage of your debit card on your checking account, so it only makes sense to apply the same level of care here.
Not Knowing Your Credit Score
Not knowing what your credit score is can be as harmful to your personal finances as not knowing what your balance each month is. While your credit score doesn’t drop if you are declined when applying to a credit card, the credit inquiry that determined your eligibility for that card does have an impact. You can find out what your credit score is by examining your credit reports. These reports can be requested from one of the three major bureaus before applying for a new credit card, and are insightful in their detail.
Not Setting a Budget or Keeping to One
Spontaneity may be considered a key part of some romantic relationships, but that certainly should not apply to any of your financial ones. In fact, properly planning your budget each month is a great way to save money and efficiently work towards the goals you set. When it comes to your budget, auditing your recurring monthly expenses is a fine way to begin. Eliminate all of the streaming entertainment services you don’t frequently use each month or reduce the number you do down to just a few. Cooking at home instead of ordering takeout is an easy way to save cash, and so is eliminating those recurring meal delivery kits if they’re not cost-effective enough to help you meet your goals. Shed the excess and stick to it for best results.
Maxing Out Your Credit Cards
Speaking of excess, you should try to avoid spending as much as your credit limit allows as it can lower your credit score. How much you charge on a card vs the total amount that you can charge on a card is known as your credit utilization ratio, and you’ll want to keep that low to prove that you’re not dependent on credit cards and less of a liability.
Excessively Leveraging Your Credit Cards to Pay for Other Credit Cards
Balance transfers are useful to lower the monthly interest you may be paying on one of your credit cards but having a strategy in place to pay off the debt before your intro period is over is key. Many credit cards lure new users to sign up with a combination of enticing rewards and lengthy introductory periods during which they won’t have to pay interest on balances transferred over. As amazing as this offer sounds, if you only make the minimum payment on your debt throughout the intro period, you may still have a balance left over when the much higher standard balance transfer APR rate kicks in.
At that point, you’ll have to pay interest at a much higher rate than what you may have budgeted yourself for, putting you back in the self-defeating cycle of seeking out another card to transfer your debt to in an effort to avoid paying interest. Your goal with a balance transfer credit card should be to pay off your debt entirely as fast as you can afford to. Why pay interest if you don’t have to, after all? Plan ahead for success if you want to break your bad financial habits and boost that credit score of yours. It’s tough, but not impossible- so start today!