Credit-harming Habits to Avoid

checking credit history on a smartphone app

The Beehive State is not the most expensive place to insure your car in the United States. The average cost of auto insurance in Sandy, Taylorsville, South Jordan, and other communities is 22.1% less than what Americans living outside Utah usually pay per every.

However, this fact might not feel true if your credit worsens. Recent research revealed that Utah ranks second in the country in terms of car insurance premium discrepancy among consumers from different credit scores. Someone with poor credit can pay up to 146% more than a person with excellent credit does.

Considering how impactful your credit on your insurance expenses, it is imperative to be mindful of your financial habits. For starters, avoid these frown-upon behaviors:

Letting Bills Go 30 Days Past Due

Delinquency is one of the worst negative marks that can appear on your credit reports. Your payment history determines 35% of your FICO scores, so punctuality matters.

But then again, missing the due date does not automatically harm your credit. Typically, your credit card company or loan lender will not tip off the credit bureaus about it as long as you settle the minimum payment less than 30 days after the due date.

Nevertheless, forgetting or failing to pay what you owe on or before the bill’s due date comes with a penalty. You can be charged with a late fee and be slapped with a higher interest rate, but your FICO scores will at least not necessarily go down.

Using 30% (or More) of Available Credit

using credit card to shop online one mobile device

The size of your available credit is not an invitation to use your plastic more. It is just a constant temptation to see how well you handle your finances. Ideally, you should use no more than 30% of your available credit. If you keep it around 7%, you can build your credit fast.

Embracing Interest-only Loan Repayment

An interest-only loan payment option makes you financially flexible every month. It can even improve your credit since more manageable repayment can help you avoid being late and diversified credit mix earns you FICO score points.

The problem with interest-only payment is it does not lower your level of debt. Your principal remains the same, so you are not making any progress. If your loan is not amortized at some point, you will be required to shoulder a balloon payment at the end of the interest-only period.

Closing an Old Credit Card

Canceling an old credit card means saying goodbye to the payment history you have built with it. Also, it will reduce the average age of your credit accounts, so closing it creates a double whammy.

If you still have an unpaid debt on that account, though, your remaining balance will stay on your credit reports for seven years. Unless you repay what is left of your mortgage or manage to convince your creditors to remove it as a goodwill gesture, the negative mark will affect your FICO scores until it vanishes.

The beauty of credit-based insurance scoring is that your premium can go down when your credit improves. Whether you hope to protect your current rate or negotiate for a lower one down the road, you should keep an eye on your credit standing regularly.