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Bad Credit Card Moves and How to Avoid Them

NEW YORK ( TheStreet) -- If you are hoping to improve your credit score, paying your bills on time is a great start. But there's a lot more to it than that. In fact, you might be making some wrong moves even if you have good intentions.

Here are some credit mistakes you should avoid before they damage your good credit standing:

Canceling a credit card you no longer use. While it seems logical to do some wallet cleaning every now and then, canceling old credit card accounts will wipe out part of your credit history, and your credit history is one of the important factors on which your credit score is based. In addition -- assuming you don't owe any balances on those accounts -- the cards can actually help you by lowering your debt utilization ratio (the amount of money you owe compared to the amount of credit you have).

For example, if you have two accounts with a $10,000 credit limit each and one has a zero balance and you owe $5,000 on the other, your debt utilization would be 25% (because you owe $5,000 with $20,000 in available credit). If you close the account with the zero balance, your debt utilization will become 50% (you'll owe the same $5,000, but have only $10,000 in available credit).

Opening too many lines of credit. Having two or three major credit cards as well as a store card or two is probably the norm for most people. But you should hesitate on opening a slew of new credit accounts because it could send up a red flag with the credit bureaus. In other words, while it's tempting to snatch up those "10% off just for applying" offers while shopping, giving in is rarely worth it in the long run.

That's because the inquiries by stores checking your credit to see if you qualify for their card will lower your credit score. If you are applying for a car loan or mortgage, that lower score could mean a higher interest rate, and that will ultimately cost you more in higher payments.

Banning credit altogether. Some people take this extreme path after getting out of debt. But not using credit or not applying for a credit card can make it difficult to qualify for a loan or mortgage down the line. Even worse, some folks never apply for a credit card. Remember that bit about credit history? The bottom line is that lenders need to see a track record or responsible credit use before they will agree to extend you credit.

Not looking at your statements. Mistakes do happen. For example, a subscription may automatically renew, or you might have signed up inadvertently for identity theft protection. If too many months go by before you catch the error, it could be more difficult to cancel and get a refund. Also, you should be vigilant about checking each charge on your statement in case someone has actually stolen your identity.

By following these guidelines and doing some research before you make a credit decision, you'll stay one step ahead of the credit score game.
Michael Germanovsky is an expert in personal finance with in-depth knowledge of credit cards, charge cards, and pre-paid cards. He began his writing career at the Novoye Russkoye Slovo, a partner of the New York Times International Weekly; and later authored a personal finance column at The Epoch Times. In 2011, Germanovsky created the Student Credit Card Education Initiative, designed to promote financial literacy and smart credit card use by young people. He is editor-in-chief at

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