What's the worst thing you can do to your credit?

Question

Financial buffs, when it comes to finance, I'm an infant. I made a couple of purchases online, one at a shoe store, one at a music (instrument) store, and both were declined since I had unknowingly over-charged my card. The card "reserves the right" to change the limit at any time, and they reduced it by $500 and I had no idea (Quite ghetto). So...
1. Is that a huge mark on my credit score?
2. Is it commone to retain a card but never use it (I have one I'm reserving for a big, $7000 purchase later)?
3. What amount of money is considered a lot of debt?

Answer 1

1. A declined authorization will never make it to your credit bureau.
2. Many times the credit company will close an account if it is not used for over 12 months. At a certain point, you would even need to re-apply and have a new credit bureau pulled to determine if they will re-open the account. The best recommendation to avoid this is to make some small purchase once every 6 months or so, and pay it off. At least it will show the credit company that you know you still have the account. Having a credit card open for a long period of time is a good thing on your bureau.
3. Most banks consider "too much debt" when your minimum monthly payments for all of your credit (cards, student loans, mortgage, loans, etc) exceeds 40-45% of your gross monthly income (before taxes)

Answer 2

Being declined won't hurt your credit score itself. But having a card that you don't use can hurt because when they run your credit report, it will show that you actually have more available to spend.

If you've got 20 credit cards, and only use 3, then the potential is there for you to go wild with those other 17. That's how credit bureaus look at things.

As for how much is considered a lot. There's no simple answer to this because it's all relative, but they do run something called the debt ratio. It measures your ability to cover monthly bills with your income. The higher the figure, the less you're able to handle the level of debt.

Generally speaking, 30% is the cutoff for an acceptable level of debt. Best to have a lower ratio than a high one!

Answer 3

it hurts your credit score by carrying a balance greater than 50% of your allotted credit on one card. I had never carried a balance before and had a score of 820, after carrying a balance of $3,000 for a month after buying a car (however I did not get any financing) my score dropped to 780. I checked everything and the only change to my credit was the fact I carried a balance on one card. I had no other changes, it took me by suprise, but when I pay it off my credit will return to where it was. It is not really the amount of money on my balance as much as the percentage of my credit I am using.

I like you also have another card that I never use. It is funny because everytime I use it they call me asking if I have possion of my card because they are scarred a fraduelant purchase has been made. Just be careful because too many cards, even if you don't use them can hurt your credit.

Oh and a credit company will never see a declined transaction, I have had several and my score was 820 a couple months ago (being 22 thats pretty good)!

Answer 4

1. This will impact your credit a bit,not a lot though. It's not as bad as a collections, or a 30,60, or 90 day late on your record. Just make sure that you pay your accounts balance down and on time.

2. Honestly here in America we love plastic. The more you use the credit cards the better. You just want to make sure that you keep on top of the balance and always pay on time. Keep it between 20% - 50% of the total limit. If you go over 50% it shows that you NEED it and depend on it. Credit card companies love those people because they get the high interest payments from them.

3. A lot of debt is anything that you owe anyone. It is best to have no debt. Just keep after any debt that you have and keep paying it down. Set up a goal and a plan to get you out of any debt. The more debt you have, the quicker your world can be a living hell. Loose your income source and you are in big trouble. I think that a lot of debt is what you cannot pay off in one month without your income source.

A helpful we site that I use all the time to monitor my credit is www.mycredtikeeper.com. It is $9.95 per month and you can check you credit without taking a hit on your score. You get a free 30 day trial if you just want to check it out. You get scores and all kinds of other stuff from all three credit bureaus.

Answer 5

I think the worst thing that you can do with your credit is aquire material items that are not a must. I believe the best thing that you could use your credit for is business. Also, any amount of debit that you cannot easily pay off as a one time payment is alot of debt.

Answer 6

the very worst thing u can do is have pass due bills and have have over draw checkin accounts have over rided ur credit cards, have written bad checks etc,,,

Answer 7

You've heard it a lot--DON'T PAY LATE!

Here are the results of a survey about late payments:
http://www.debtsmart.com/pages/survey_results_030129330.html

Jack

Answer 8

Do not be late on a payment. Even if it's not the full amount.

Answer 9

ruin it