Top Credit Card Mistakes That Hurt Credit Scores – November 10, 2009 (back to news stories)

It's been a common news story over the past year: credit card companies aggressively raising interest rates and fees. If you make a mistake with your card, it will cost more dearly than ever. There are a number of mistakes consumers make with credit cards, because at first blush, they might seem like a good idea. CreditCards.com recently put together a list of some of the most common and costly choices consumers are making. HOW MANY CARDS DO YOU HAVE Experts say you shouldn't be asking yourself what's in your wallet, for example. You should be asking how many cards are in your wallet. Having too many pieces of plastic is one of the worst credit card mistakes people make. It was ranked six, with one being best and 10 being worst. Too many extra cards can impact your credit score and make it hard to track all those balances. Emil Ronchi, a financial planner from Salem, said "If you are just buying everything without thinking about it, and then you get the credit card bill at the end of the month and you can't pay it or you are carrying a balance, clearly you have to do something." MAXING OUT A CREDIT CARD Another mistake is maxing out a card. That rates seven in terms of being a bad financial decision. Ronchi says this might be the time to start thinking about paying with cash more often. "If you are aware of every transaction, that adds a cost to you and it's a mental cost. But you are going to do it less because it's more painful." CASH ADVANCES Getting a cash advance on your credit card can also be a bad idea. It rates eight out of 10. Remember that interest starts accruing the moment you get the money. MISSING PAYMENTS Missing a payment is even worse. It rates nine out of 10. A third of your credit score is based on your ability to pay your bills on time. Ronchi says this could be the time to ask some tough questions. "You have to define, do you have a problem? And if you have a problem controlling credit spending, then you need to stop." DEBT SETTLEMENT PLAN The worst mistake you can make is using a debt settlement plan. Next to bankruptcy, it's the worst thing you can do to your credit score. It's a nine-and-a-half in terms of the damage it can do. OTHER MISTAKES There are some actions that don't have the same dramatic effect on your credit score, but are still not recommended. For example, experts say you shouldn't use a credit card just to get reward points unless you are able to pay the card off in full. Another is repeatedly transferring existing balances to a new card. About 15 percent of your credit score can be affected by just applying for new credit. If you do it too often, your score can take a hit.