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Avoiding the Grim Reaper of Credit: Dodge These 5 Mistakes To Keep Your FICO Score Alive

Oct. 29, 2013
Credit Score
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Halloween is a special time of year that gets us thinking about all the stuff that goes bump in the night. When it comes to money, there are plenty of real-life horrors to try to avoid. We’ve all heard financial horror stories, and there’s no tool better at turning a few money mistakes into a Hitchcock drama than a credit card.

To keep your credit surviving and thriving this Halloween, avoid these five credit card mistakes:

1. Paying Only the Minimum

Paying the minimum on your credit card bill every month is tempting. Many of us have done this, but it’s important to remember that making minimum payments is a surefire way to turn your credit from treat to trick.

That’s because the minimum payment barely pays the interest the bank is charging you for the balance on your card, so you’re making almost no progress in paying what you owe. This could lead you to hang onto debt and get close to your credit limit, both of which will ding your credit score (see below). So be sure to pay more than the minimums each month – even a little extra can go a long way.

2. Charging Way Too Much

Again, credit cards come with many temptations, and sometimes your available credit feels like “free money.” But building credit card debt is a serious no-no when it comes to your credit score, because 30% of it is decided by how much you owe. It’s important to avoid charging more than you can pay off within a month – or else you might find yourself in way over your head.

3. Paying Credit Card Bills Late

Zombies might live forever, but that won’t seem as long as the black mark you’ll be stuck with on your credit report if you don’t pay your bills on time. 35% of your credit score is decided by your history with paying your bills on time. Make it a priority to pay on time by setting reminders on your phone or marking due dates on your calendar – do whatever you need to make sure you don’t forget, or else your credit will find itself staring down the grim reaper in no time flat.

4. Getting Too Close To Your Credit Limit

Even if you’re paying your credit card bills on time and avoiding getting into too much debt, you could still be in trouble if you let your balance get too close to your credit limit. That’s because the major credit bureaus don’t look kindly on customers who use more than 30% of their available credit at any time. That means it’s important to keep tabs on how much of your available credit you’re using, and to take immediate action if you start getting close to your credit limit. There’s no magic spell that will take care of this for you – it comes down to careful accounting and a watchful eye.

5. Applying For Too Many Credit Cards

Using credit cards responsibly is a great way to build credit, but if you’re applying for too many cards too often, you could hurt your credit score. Ten percent of your score is decided by the number of credit inquiries you make, and too many can act as black magic when it comes to your credit rating. Be sure to keep credit card applications to a minimum, and shop for new credit within a 30-day window.

The bottom line: Truth is always scarier than fiction, and making too many mistakes with your credit card can make for a financial horror story that’s hard to find your way out of. Avoid these credit card mistakes to keep your credit in the land of the living!