Ranking the consequences of credit card debt is like trying to pick a workout class post-vacation. (Not that you’re necessarily going to the gym or out of town right now...but follow us.) They’re all gonna hurt, but some will leave you sorer for longer.
Yeeeah, that’s painful.
So is damaging your credit score. That’s the number that shows lenders what kind of borrower you are. And helps them decide how much interest to charge you for things like mortgages and car loans. Usually, a high score = lower interest rates. And low interest rates mean you pay less money over time.
I like the sound of that.
Then pay your credit card bill the day it’s due. Every time.
When credit bureaus (companies like TransUnion, Experian, and Equifax that track and share your credit info with lenders) calculate your score, they look at how you’ve handled credit in the past. And they care a lot about punctuality: payment history counts for 35% of your FICO score (the most popular type of score). Meaning your number will go down if you’re late on the reg. Set a cal reminder or an auto-payment, so forgetting is not an option.
Related: Learn the Language: Credit Card Debt
What else do credit bureaus care about?
How much debt you have compared to your total credit limit. Aka your credit-utilization ratio. This makes up another 30% of your credit score. Lenders like to see this ratio around 30% or less.
Pro tip: making two card payments per month can help you keep your number low. So can keeping old credit card accounts open, so those unused credit limits work in your favor. And you can ask your credit card company for a limit increase.
If it always feels like somebody’s watching you...that’s the credit bureaus. They need to see how you spend — and repay — money to help lenders decide how much they can trust you. Impress them by getting out of credit card debt and showing off your higher credit score.
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