Credit Tip: Pitfalls To Avoid When You Are Working On Your Credit

When it comes to building credit, it’s easy to get overly focused on ways to raise your credit scores fast. The truth is that building credit takes time. So take a step back and make sure your strategy doesn’t do more harm than good.

Here are a few “don’ts” to keep in mind.

• Don’t apply for a bunch of new credit cards just because you want to increase your credit utilization. Even though this might help lower your credit utilization ratio, it could also make you look like a risky borrower thanks to the new hard inquiries on your reports.

• For the same reason, don’t take out a loan just to improve your credit mix. Only apply for a new loan if you actually need it.

• Don’t carry a balance on your credit card just so you can build credit. Carrying a balance can lead to unnecessary interest charges, and it might actually hold your scores down by increasing your credit utilization ratio.

• Don’t cancel your credit card after you pay it off — unless you have a good reason to do so. Closing your credit card will hurt your length of credit history, so it’s better to leave it open, even if you’re not using it anymore. Of course, if having a card tempts you to spend more, or it comes with an expensive annual fee, you might want to rethink this conventional wisdom.