Common credit mistakes

How to protect your credit rating when living on a fixed income.

Common credit mistakes

When you’re living on a fixed income, applying for credit can be a necessity to pay for larger items and spread the cost, however, there are a few things you should know to protect your credit rating.

Don't close old accounts
If it’s taken you forever to pay off a credit card you may be tempted to say goodbye forever and close the account. However, in the eyes of credit rating companies you’ll have less credit available, and the credit history for that account is no longer available, and this can actually reduce your credit score. If you can’t trust yourself, simply cut up the card and leave the account as it is.

Don’t spend big if considering bankruptcy
Bankruptcy is the last option for many people and it’s easy to think that if you’re facing financial ruin, you may as well spend as much as you can now and have your debt wiped. Creditors can challenge your bankruptcy application and it may be rejected by the courts, leaving you liable for even more debt.

Don't be tempted by store cards
Staff in department stores often push branded credit cards as they get commission for every person they sign up. While it may seem a tempting way to spread the cost of your purchases, it’s more likely to tempt you into spending more. Also, once the introductory offer rate is finished, the interest on store cards is usually higher than that on your average credit card.

Think before agreeing to be guarantor
We all know how difficult it can be for a first-time buyer to get their feet on the property ladder. One way banks make it easier for them is to ask for a loan guarantor. While you may be keen to help, you should be aware that despite their best intentions, first-time buyers can fall behind on repayments, for which you will be liable.

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    To make a comment, please register or login
    1st Dec 2014
    Debbie, your last point is simply not correct in relation to cash-based rewards. Cash can't depreciate or be purchased cheaper elsewhere.

    I purchase everything I possibly can using my credit card, purely to build up my reward points. Then I PAY OFF THE FULL AMOUNT EACH MONTH (I have an automatic payment set up specifically to do this for me) so I NEVER PAY ANY INTEREST on my purchases.

    With the accumulated points, I RECEIVE A $100 CASHBACK REWARD every 3 to 4 months.
    Used in this way, a well-managed credit card can be used interest-free for purchases, earn a considerable cash income, and still provide all the usual convenience and other advantages.
    Also, the money that I would have been using for my purchases stays in the bank for longer, earning a bit more interest.

    NOTE - This only works if you have a "free days" credit card account and pay off the whole amount each month. If you can't afford to do this, cut up your card.
    2nd Dec 2014
    I agree Hawkeye. I do the same. However, it really only works if you are buying the things you would have bought anyway. I pay as much as I can on my credit card then make a single transaction each month to pay it off. No bank fees as well as no credit interest to pay.

    If you go out spending on 'stuff' just to collect points that is a real danger.
    22nd Jan 2018
    This is very informative..nice article, i am so so pleased to have come in contact with this credit repair team called Master credit fix.i contacted him through a blog and i am well impressed with his services,my score is at an all time high of 815 and all my negative collections and late payments have been removed from my credit profile,what else could i wish for??
    If you need his services mail to and you should tell your family and friends too.

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