You need to use credit to get credit, but when does credit use become more indicative of financial problems than future financial success? Here are 5 signs that your credit usage is out of control.
- You’re charging because you’re short on cash
If you have a mile-long list of credit card inquiry on your credit report or you are always using your credit card because you want something right away, you might live high off the hog for a few months, but when you max out your cards you will be stuck with your financial problems.
Credit is about convenience, but only if you can pay off your balance without stretching.
- You’re charging because you have no savings
Emergency funds are crucial to financial success, and there is a limit to how many times you can rely on a credit card inquiry to result in a brand new, empty credit card. By relying on your ability to get credit as your “safety net” you are guaranteeing that sooner or later, you will have financial problems.
- You always apply for new cards when you can
If you have a credit card for every store you visit, you have too many. Each time you apply for a new card, a new inquiry will appear on your bureau and each inquiry will lower your credit score.
- You pay off credit with credit whenever you can
Although balance transfers (i.e. placing the balance from one card and on another card with a lower interest rate) can save you money in the long run, which only works if you have the means to pay it off?
If you are going through credit card inquiry after credit card inquiry to get approved for a transfer, stop.
- You’re refinancing because you can’t pay up
Although refinancing can help in the event of short-term financial stress (like a job loss)each instance will result in a new inquiry on your bureau lowering your credit score and costing you hundreds of dollars in interest over the length of your now-extended contract.