10 Common Credit Mistakes That Can Damage Your Financial Standing (2024)

Don't close old credit card accounts

En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.

Don't max out your cards before a bankruptcy

We all know that gas prices can eat into our budgets. But even if your wallet is taking a serious hit every time you fill up your tank, it's still wise to avoid applying for gas cards and buying fuel on credit. Ditto for applying for department store credit cards. Gas cards and retail store cards usually have very high interest rates — far higher than national brand cards such as Visa or MasterCard. Plus, if you frequently apply for multiple credit cards, you'll generate inquiries on your credit report, lowering your credit score. To avoid these problems, only apply for credit when you truly need it.

Don't apply for gas cards and department store cards

If someone calls, mails or emails you unsolicited and requests sensitive personal information such as your credit card number or your Social Security number, never divulge it, no matter how nice or legitimate the person sounds. Such requests are often financial scams targeting seniors. Criminals are trying to steal your money or make unauthorized use of your credit and good name. If you ever become the victim of identity theft, report it immediately to your local police department and to the Federal Trade Commission. You can reach the FTC toll-free at 877-ID-THEFT (877-438-4338) or atits website.

Don't cosign for someone else's loans

To help maintain a healthy credit rating, you should check your credit reports free of charge at least once a year at thegovernment-mandated website. But a once-a-year checkup isn't enough. You should also routinely watch out for the warning signs that you may be in debt trouble. Some red flags include: being able to make only minimum payments, missing payments, charging without knowing how you will pay your bills, and constantly seeking zero percent card offers or low-rate balance transfers just to be able to afford your payments. If any of these warning signs sounds familiar, seek help from a trusted nonprofit credit-counseling agency.

Don't share your credit card number

If you don't pay a federal tax debt, the IRS has the power to levy your assets, seize your tax refund or put a lien against your property. But none of that should scare you into paying with a credit card. That's because if you do, you'll also have to pay an "interchange" fee. This can run anywhere from about 2 percent to 4 percent of the amount you're paying. Now add that to the 12 percent to 18 percent interest you'll pay to your bank if you add the tax charge to your card's balance. A better solution is to work out a repayment plan with the IRS and pay your tax debt over time.

Don't be pressured into accepting new credit cards

• 10 common credit mistakes
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• 10 ways to cut expenses

Get savings on a new car with the AARP Auto Buying Program

Don't ignore the warning signs about credit problems

En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.

Don't fall for credit repair schemes

En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.

Don't pay your tax bill with a credit card

En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.

Don't put major expenses on credit just for "rewards."

En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.

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En español| So, you finally paid off that credit card bill that's been nagging you for ages. Your first inclination may be to say "Good riddance!", cut up the card and close the account. Not so fast. Closing the account can actually lower your credit score. First, you'll have a smaller amount of available credit and you'll be making your credit history with that card go away a lot sooner. Available credit and account history factor in your credit rating. Even if you pay off a credit card, you're usually better off keeping that card open.