How using credit cards can affect your credit negatively.
Credit cards can cause for a negative affect on your credit rating, especially if they are not managed correctly. There are many areas of a credit card that create roadblocks in your financial future due to incorrectly used credit cards and loans.
A negative credit score can create a huge problem in the savings and spending areas of your life. This can make the difference in several thousands of dollars that you would have to pay out in interest alone. Not only will it affect the money you pay out, but it may also affect the purchases with loans you would be able to make in the future, furniture, cars, homes, investments etc.
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Loan companies will take a look at your credit history and make the decision on whether you can continue with your life plans or if they feel you are not managing your credit correctly. Sometimes the scores on your credit are not even yours and then you are being impacted financially unfairly. This is why managing your credit correctly is so important for your financial future.
Your credit score does not show any explanation of problems that occurred in your life or any other notes on what changes happened. All it shows is the basics of what payments you made to the debts you have and if they were in a timely manner, or if a judgment was ever issued.
There are specifics that are looked at when your score for your credit is created.
Payment history - 35%
Amounts owed - 30%
Length of credit history - 15%
New credit - 10%
Types of credit used - 10%
The reasons that often times people end up with negative marks on their credit scores due to credit cards are for one or more of the following reasons.
Late payment
Non-payment
Is this a new credit card account?
How much do you owe on this credit card?
Incorrectly reported credit limit
Using more than 80% of your available credit
Bankruptcy and credit cards not being paid
Too many new requests for credit cards
Canceling many credit card accounts
Here are some tips that can help you to not have a negative affect from your credit cards on your credit report.
Make sure your payments are paid in full if possible and on time.
If there is a medical or life changing experience that is affecting your ability to pay your payments on time, you should contact the card company and ask for an extension so that they will not make a negative mark on your credit.
Do not apply or have to many credit card accounts.
Do not cancel a credit card account unless there is a good reason, like fees etc. Closing accounts can have as much of a negative affect as opening accounts.
Try to go through some other form of financial help like a consumer credit counseling service instead of taking out bankruptcy.
Check your credit history at least twice a year, if there are errors make sure to dispute any marks that are not yours or are in incorrect amounts.
What ever steps you take to creating a financial future for yourself through credit, remember it is more important to have small amounts of credit that is paid on time, and in full than several accounts that are charged up with minimum payments being paid.
