Few credit card users (if any) get through life without making a financial misstep or two when using plastic. Even something that seems like an innocent oversight could seriously damage your credit standing, but in many cases, a single mistake isn’t a big deal. Before you start kicking yourself, find out if there’s a simple solution to whatever credit card problem you’ve run into.
1. Missing a Payment
One of the worst things you can do is fail to pay your credit card bill on time, because your payment history is the single factor with the largest impact on your credit standing. One missed payment could significantly knock down your credit score — the higher your score is, the further it can fall after a missed payment.
Make sure you don’t do it again. If your late payment was a one-time thing, your score will bounce back within a few months, because it’s when you have a pattern of risky behavior that your credit score can really suffer. Yes, you’ll have to deal with the negative fallout of that single missed payment, but a little patience and discipline going forward will make that a problem of the past soon enough.
You might even be able to undo the damage. If you have a history of never missing a payment and you call your credit card issuer to explain the circumstances, it might give you a break. If nothing else, your issuer might reverse the late fee.
2. Spending Too Much
When your credit card balances creep closer to your credit limit, your credit score suffers — that balance-to-limit ratio is called your credit utilization rate, and it is one of the most influential factors in your credit score, after payment history.
If you realize you’re using too much of your available credit (you should aim to keep it below 30% of the limit, and the lower the better), do what you can to pay down the balances and use less of the cards’ limits. You may see your score improve significantly if you drastically reduce your credit utilization rate from one month to the next.
You can also consider returning unnecessary purchases. Check your card’s benefits, because some credit cards offer return protection, even if the retailer won’t issue a refund.
3. Losing Your Card
You can avoid a lot of headaches by canceling a lost card as soon as you realize it’s not in your possession — it usually takes only a quick phone call. If you use the lost card to pay bills, make sure to update those accounts if you cancel the account. It may seem inconvenient, but it’s probably worth it, given the alternative of trying to reverse fraudulent charges and any impact they may have had on your credit standing.
4. Closing a Card
Maybe you thought closing a credit card would help your credit score, but when you check your credit score, you see that your score went down. That’s because closing a credit card reduces your available credit, and if you don’t also reduce your overall credit card balances, your credit utilization rate will go up.
It may not be something you can do quickly, but focus on reducing your credit card balances as much as possible, so you can lower your credit utilization rate to where it was before you closed the account — even better, get it lower than it was before. That may mean using your credit cards a lot less than you used to or paying down debt more aggressively than you were before, but if you want to recover from the damage you did by closing the account, that’s one of your only options.
You could also consider opening a new credit card to increase your overall credit limit, but if you just closed a card, it’s likely you may not want to open a new one. Apply for credit only when you need it, because applying for new credit can hurt your credit score, too.
5. Falling Into Debt
Just because you’ve gotten into credit card debt before doesn’t mean you should never use credit cards again (though for some people, that’s the only way to stay debt-free).
First of all, if you’re currently in debt, explore your options for getting out. You might be able to make a debt-payoff plan yourself, but if you do the math and realize you can’t afford to pay off the debt within a few years or the task is too daunting to do alone, consider going to a reputable credit counseling agency for help.
You can rehabilitate your credit by making future loan and credit card payments on time and keeping your debt balances low. When working to improve your credit standing and minimize your debt, consider using a credit card very sparingly and paying it off immediately — you may not want to carry it with you, to avoid the temptation to overspend. As you work to rebuild your credit, it can help to monitor your credit score over time to check your progress. You can get your credit score for free through many sources — including Credit.com, where you can get two of your credit scores updated every 14 days.
More on Credit Cards:
- The Credit.com Credit Card Learning Center
- How to Lower Your Credit Card Interest Rates
- 6 Smart Credit Card Strategies