For people in New Jersey and across the U.S., it can be very easy to fall into significant credit card debt by not understanding a few basics. Mistakes can be costly and can lead to financial challenges and even bankruptcy. For example, cardholders often choose to make the minimum payments due to finances or simply because they do not want to pay a larger amount. Making a late payment can damage a credit score. FICO states that payment history is 35 percent of how the score is determined.
Another factor in FICO's determination of a credit score is how much is owed. The credit utilization ratio accounts for 30 percent of the score. If, for example, the credit limit is $10,000 and $5,000 is the balance, that is a 50 percent utilization ratio. With the amount of information on a statement, many credit card holders do not bother reading it. Those who do not look at what was purchased might simply pay what is owed and miss fraudulent charges or errors.
Reading the fine print might seem tedious, but this information details the interest rates, fees and charges for going over the credit limit. Having too many accounts can cause credit card companies to look at the credit score. If there are more inquiries in a short period, it can negatively influence the credit score. Cash advances have a high interest rate that is usually much higher than purchases. Those who need cash often use credit cards to get it without realizing how expensive it will be.
Credit cards are often a necessity. Unfortunately, this leads to many people making mistakes with their cards. These mistakes can cause delinquent payments and a large amount owed to creditors. For many, filing for bankruptcy is the only solution.