Tips on your personal credit rating

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Your credit rating is extremely important.

Every time you attempt to borrow money the lender will check your credit rating to determine if they should approve the loan. This includes applying for a mortgage, credit card, car financing, or any other debt.

Because so many consumers use credit cards for their financial transactions, a large part of credit ratings come from credit card use.

Try to avoid these five common credit card mistakes that could hurt your credit rating.

1. Pay your credit card debt on time. Any business that lends you money wants to be repaid. Having a history of not fulfilling your obligation of payments will hurt your credit rating. Also, interest charges on overdue payments are astronomically high.

2. Do not use more than 75 per cent of your allowable balance. For example, if your credit limit is $5,000 try not to owe more than about $3,700. The logic is simple. If you have a $5,000 credit limit, lenders want to see that you are living well within that limit. If you consistently use up your available credit there will be a lingering question if you are able to pay off this amount of debt.

3. Try not to withdraw cash at an ATM using your credit card. This can be interpreted as your inability to manage your monthly cash flow and makes you less attractive to lenders for future credit.

4. Do not apply for more credit cards than you need. This can be difficult because at the checkout counter you might be offered a discount on your purchases if you apply for a new credit card. Lenders view this as shopping for credit, which can lead to a lower credit score.

5. The final mistake people make with their credit card is paying it off immediately after a purchase. In order to build your credit rating, wait until the due date on the bill so the company knows you use your card and are able to pay it off on time.

Personal credit is important. Avoid these common credit card mistakes to help put your mind at ease regarding your credit rating.