4 Things You're Doing Wrong with Managing Your Credit
We’re sure you’re doing a great job at every other aspect of your life. We’re sure you’re even doing a supreme job of looking out for your money – making those payments on time, keeping an eye on any suspicious, fraudulent activity, as well as putting money into your retirement fund. If you’re even doing 2 out of 3 of those, we applaud you.
Still, there is always room for improvement. And when it comes to your credit score and managing your finances, there can be no if’s or maybe’s or half shrug’s, especially if you’re considering getting an auto loan.
Here are 4 things you’re probably doing wrong with your money that is definitely impacting your credit score.
Carrying a Balance
Don’t. Just don’t. Carrying a balance on your credit card each month, and paying interest on it, isn’t necessarily bad, but it isn’t helping your credit score either. If you’re looking to build your score back from the firey depths of Poor Credit Land (just a hop skip and a jump from the doomsville of Mordor) then you need to start thinking about paying in full, paying on time. Because carrying a balance collects interest, and if your balance is high, and you’re only making the minimum payments, you’re digging yourself into a hole with no ladder.
You Don’t Look at Your Credit Report
Pull your report. Pull it now. We know it’s not fun, but it’s something you need to do every year. Like getting your teeth cleaned or getting that questionable mole removed. Don’t wait until you’re applying for a loan to get an insight into where your credit is. Make it a new rule. Think of it like the annual physical check-up: less invasive, minus the snap of the rubber gloves, but still just as jaw clenching. Checking your score once a year won’t hurt your credit, and you can get a free copy. Plus, don’t forget: if you see a mistake on your credit report, you can contact the credit bureau that contains the mistake and ask them to investigate.
You Pay Bills in Full, But Also Late
Your payment history is one of the biggest factors in your credit score. It accounts for 35% of your score. One of the biggest mistakes people make when it comes to payments is thinking they just have to pay the whole amount in full, regardless of whether or not they pay on time. While we applaud you for putting enough of your paycheque aside each month to pay off your debt in full, it isn’t helping you at all in the long term. Paying in time is what counts. While lenders can’t report you as late until 30 days after a payment is due, it’s a good idea to always set reminders in your phone to pay on time, as quickly as possible.
Or the Alternative: You Pay Off All Your Cards at Once
We know. This is tricky. And we’re probably making your head spin. But while paying down high balances can help improve your credit score, if you pay them down all at once and then leave your credit card alone, your score can take a hit. Maintaining a good score means you need to maintain consistent activity. So even though it might feel good to not reach for that credit card to pay for dinner, it’s actually hurting instead of helping. We’re not saying you need to go out and make it rain three times a week. Once a week is fine, and maybe just a light sprinkle. Just don’t tuck away your credit card in a drawer or freezer and forget about it. They’re meant to be used. So use them!