Be careful with your credit cards to help your credit score
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After the recession, many North Carolina consumers are hesitant about using credit cards because they don’t want to accumulate debt. While Millennials tend to prefer debit cards, consumers of all ages have become more cautious about debt. Avoiding debt isn’t a bad thing, but it can prevent you from optimizing your credit score. Here’s a look at the rest of the seven tips in this two-part series of tips to use credit cards wisely to improve your credit score while avoiding debt. Also, check out part one for more tips.
#4 Be Careful of Utilization
Your credit utilization is an important and significant component of your credit score. Some bloggers will tell you that you’re okay so long as you don’t go beyond 30% of your total credit lines. The advice you might see is that if you don't exceed your total credit lines by one-third, you’re fine.
That’s not entirely true. If you have $10k in total credit limits but only have a $2k balance, that’s 20% and seems fine. But if that $2k maxes out one card with a $2k limit, you can still see a negative impact to your credit score. The best way forward is to pay off your balances in full each month.
#5 Monitor Your Card Use and Credit Report
One important strategy to safeguard your credit score is to keep an eye on both your credit card accounts and your credit report. If you don’t monitor your credit card usage, if it’s stolen or a creditor overcharges you, you won’t know when something bad happens so you can shut it down.
You also need to monitor your credit report to make sure you’re not the victim of identity theft and that errors aren’t accumulating. A shocking percentage of credit reports have errors. These can be hard to correct particularly if you don’t notice for a while. Monitor both monthly for best results.
#6 Use Carefully for Emergencies
One of the things that credit cards can help with is for emergencies. For instance, if you have an unexpected car repair, having a credit line can keep you on the road, so you don’t miss work and incur more expenses. Credit cards can help bridge you until the next payday and help you budget.
The main thing you don’t want to do is rack up debt and carry it over month after month. Credit card debt incurs interest charges and if you don’t tackle the debt, it can spiral out of control. Credit cards should only be used for things you can afford to pay off at month’s end except in the case of emergency.
#7 Never Miss a Payment, Never Max a Card
One hard and fast rule of thumb is that if you mishandle your credit cards, it can tank your credit score. Two things to avoid at all costs are missing payments and maxing out a credit card. You might think one missed payment is no big deal, but that’s not true. One missed payment can send your score crashing.
And maxing out a credit card can do the same. If you do stack up a balance on a credit card, you should pay off as much as you can that month, so you don’t carry a maxed balance month to month. These two bad habits can take a good credit score to poor very quickly.
If you’re in over your head with credit cards, bankruptcy can help you shed this debt and get a fresh financial start. Contact the Law Offices of John T. Orcutt to learn about the benefits of North Carolina bankruptcy. Call +1-919-646-2654 today for a free consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.