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5 Ways to Avoid Ruining Your Credit

Last updated July 21, 2021

When it comes to credit, it takes a while to build up your score and just a few mistakes ruin it. Here are 5 ways you can avoid ruining your credit score.

Know the basics.

Building your credit takes time and skill. While it might be easy for you to get your first credit card, it can be hard to manage it if you don’t know the basics. Do you know the difference between a checking account and a savings account? The fee for late payments? What a good credit score is or how high your interest rate will be on your credit card? Not knowing the basics of financial literacy and the money moves you need to make is a fast way to ruin your credit.

Don't make any late payments.

All it takes is one late payment to make your credit score drop. If you have a credit card, try your best to always pay your bill within 30 days or less. Do not skip or miss a payment. Doing so will guarantee your credit score will drop, which can signal to lenders that you are not responsible with your money. Lenders have the right to lower your available balance on your credit card, which will make your credit score even lower.

Keep your credit card balance low.

Just because your credit card has $1,000 in credit available doesn’t mean you should use it all without paying it off entirely each month. In fact, one of the factors that determines your credit score is your credit utilization score. The rule of thumb is to keep your credit utilization ratio around 30% of your available credit; but the lower the better.

Stick to one credit card.

Account inquiries are one of the five factors of your credit score. Applying for multiple credit cards too fast and too frequently will make your credit score drop and it signals to lenders that you might not be responsible with money. It also puts you at risk for going over budget and spending too much money on things you do not need and can’t afford.

Pay all of your bills on time.

It’s not enough to pay your credit card bills on time. Lenders want to know that you pay EVERY bill on time. This includes, rent, cell phone payments, utilities (electricity, water, gas, etc.), car payments. If you are late on some of these payments, it can damage your credit score.

Want to learn more about your finances? Be sure to check out all of our resources on financial literacy, or follow us on Instagram @getschooled!

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