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Credit card mistakes

Many people in Kentucky use credit cards as a way of managing their personal finances. Unfortunately, common mistakes can have a catastrophic effect on a credit card user's financial situation.

Many people are aware that using credit cards to freely can result in a mountain of debt that is difficult to pay off. What some do not realize, however, is that it is not just overspending that presents a problem. Creditors use sophisticated algorithms to analyze a consumer spending habits, and this affects that individual's credit score. A lowered credit score can result in the consumer having to pay higher interest rates, higher premiums on insurance, and receiving less favorable terms on mortgages and other loans.

One thing that credit card users often do not realize is that their credit score is dependent, in part, on their use of existing credit. If someone has a $5000 limit on a credit card, they are technically entitled to use that entire limit for purchases. However, a high balance on the card sends a warning signal to creditors that the card owner may be financially strapped. This can cause a decline in the user's credit score.

Another mistake that some credit card owners make is to close out cards that they no longer use. The problem is that this practice further reduces the card owner's available credit. Unused credit is generally good for credit scores, whereas limited credit has a negative impact.

Individuals who have high credit card debt and who are having trouble making minimum payments may benefit from speaking with a consumer law attorney. A lawyer may be able to make recommendations, which may include filing for bankruptcy, after possibly reviewing the consumer's credit history and financial situation. Having knowledge of options can help a financially strapped consumer make good choices about his or her future.

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