The Most Common Credit Mistakes

Credit card use has become a way of life for many Americans. You would think that would make some people experts on how these credit cards work, but that isn’t necessarily the case. Here are some common mistakes credit card users make and how to avoid them:

  1. Closing Unused Accounts – When you are done using a credit card, it may make sense to simply close out the account; after all, you aren’t using it anymore. But in most cases, that is a mistake. Why? There are two reasons mainly. First, closing out a credit card can lower your credit score by lowering your available credit. Second, credit history matters, so closing out the card will erase this history, which will reduce the impact of your positive credit history with that lender.
  2. Maxing Out Cards – Just because you have the credit available to you doesn’t mean you should use it all. If you do, you are likely to hurt your credit score. It is better to use half the available credit on two cards than maxing out one.
  3. Not Reviewing Credit – You should make sure you check your credit report at least annually. You are allowed to view each bureau’s report free once every twelve months. Despite this, nearly half of all Americans fail to check their credit for simple mistakes that could prove costly down the line.
  4. Co-signing Loan – Co-signing on a loan is ultimately becoming responsible for someone else’s debt. There is mostly just downside to doing this, with little to no upside at all. You are, in essence, assuming all the risk with none of the benefits.

These are just a handful of credit mistakes that many Americans make. Avoiding them is actually easier than you think, but if you find yourself stuck in over your head, it is critical that you reach out for help. Sometimes all it takes is a few changes and a solid plan to get yourself back on track financially.

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About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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