Credit Card Mistakes to Avoid
When you’re buying a St. Louis home, every part of your financial history matters, including how you use your credit card. Your credit card impacts your credit score, and that score helps determine whether or not you can get a loan for a St. Louis home.
If your credit score isn’t where you want it to be, check out these six credit card mistakes to avoid in St. Louis.
Keeping Large Balances
High credit card balances can still hurt your credit score even if you’re paying off the full amount each month. The general rule of thumb is to keep your debt-to-credit utilization ratio low – that is how much debt you have on your credit card divided by your credit limit.
You should not be spending more than 30 percent of your allotted credit limit each month. When you spend so much, lenders wonder whether you’ll be able to keep your spending habits under control while you’re paying your mortgage.
Not Making Payments on Time
The easiest way to keep your credit score up is to make payments on time. This accounts for about 35 percent of your credit score, so it’s really important that you don’t miss even one payment. If you need a reminder to pay on time, set up automatic payments or an alarm to remind you when your payment is due.
Ignoring Your Credit Report
You can check your credit report every 12 months for free. Doing this will help you keep track of your credit and alert you to any red flags of problems you might encounter.
If you’re planning on buying a St. Louis home, the you should check this report before going to a lender. You’ll be ahead of the game, and you’ll be able to rectify any problems on the report and start building your credit score before your lender runs the report.
Opening New Credit Card Accounts
When you apply for a new credit card, the lender does a hard inquiry on your report, which can knock your score down by about five points. It might not seem like much, but if you keep opening new accounts, then it can really bring down your score quickly. Remember, you want to keep the average age of your credit card accounts high, which counts for about 15 percent of your total score. Avoid opening new accounts at least until after the home is bought.
Closing Your Oldest Accounts
Likewise, closing an old account lowers that average age score. Even if you don’t use the account often, don’t close it. Make a small purchase every quarter or so and pay it off quickly.
Keeping a Balance
You need to be paying of your credit card each month. Making minimum payments is okay for now, but if you really want to bring up that score, then you need to keep up with your finances. Doing this won’t directly impact your score, but it will make you more aware of what you’re spending, and it will stop you from overspending.