At O1ne Mortgage, we prioritize your financial education and well-being. Understanding how to effectively manage your credit cards can significantly impact your financial health and open doors to better mortgage options. Here, we outline common credit card mistakes and how to avoid them, ensuring you build a strong financial future.

1. Missing a Payment

Payment history is crucial for your credit score, making up 35% of your FICO® Score. Missing a payment can lead to late fees, higher interest rates, and a negative impact on your credit score. To avoid this, set up autopay and sign up for payment reminders. Making small payments multiple times a month can also help ensure you meet at least the minimum payment requirement.

2. Regularly Carrying a Balance

Paying off your entire credit card bill each month helps you avoid interest charges and keeps your credit utilization rate low. Credit utilization, which accounts for up to 30% of your credit score, is the percentage of available credit you use. Aim to keep your utilization below 30%, and ideally below 10%, to maintain a healthy credit score.

3. Using Much of Your Available Credit Throughout the Month

High credit card balances at any point in your billing cycle can negatively impact your credit score. Consumers with exceptional FICO® Scores (800-850) use just 6.5% of their available credit on average. Strive to keep your utilization low throughout the month to achieve an excellent score.

4. Letting a Balance Linger Beyond a 0% APR Promotional Period

Introductory 0% APR credit cards can be beneficial, but it’s essential to pay off the balance before the promotional period ends. Otherwise, you could face high interest rates, with the average APR at 20.09% as of February 2023. Always make at least the minimum payment during the 0% APR period to maintain a good payment history.

5. Sharing Your Credit Card Data

Protect your credit card information by being cautious of unsolicited requests for your data. If you receive a suspicious request, contact the source directly to verify its legitimacy. Credit card fraud is sophisticated, so always operate from a place of skepticism when your data is requested.

6. Missing Out on Rewards

Credit card rewards can offer significant benefits, such as cash back or travel miles. If you can commit to paying off your balance each month, consider using a rewards card for regular expenses. Choose a card that aligns with your spending habits to maximize your perks and ensure the benefits outweigh any annual fees.

7. Losing the Flexibility of Your Grace Period

Credit cards offer a grace period between your statement closing date and your bill’s due date, during which you are not charged interest. If you carry a balance from month to month, you lose this grace period, and interest charges will accrue from the statement closing date. Plan your purchases to take full advantage of the grace period.

8. Taking a Cash Advance

Cash advances are expensive due to high interest rates and fees. Instead, explore lower-interest funding options such as personal loans from credit unions or short-term loans from your employer. Avoid cash advances to prevent unnecessary financial strain.

9. Frequently Opening New Accounts

Opening new credit card accounts frequently can lower your credit score, especially if you have a limited credit history. New credit accounts for 10% of your FICO® Score. Be selective about the credit card offers you accept to protect your score and manage your accounts effectively.

Making Credit Cards Work for You

Credit cards can be a valuable tool for building credit and earning rewards if used strategically. Avoid carrying a balance, choose the right rewards card, and plan your purchases around your grace period. By steering clear of common mistakes, you can improve your credit score and take control of your financial future.

At O1ne Mortgage, we are committed to helping you achieve your financial goals. For expert mortgage services and personalized advice, call us at 213-732-3074. Let us help you navigate your financial journey with confidence.