This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

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 Credit-Land.com.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs