Would you choose to use a cash advance or pay a bill late to avoid a late fee? Would you skip a payment altogether just to double up on another? There are many different approaches to making ends meet, but many will not help at all. It is a bit like using a band-aide when what the wound really needs is a few stitches. Solving the problem for a few days or weeks at a time is not really solving the problem, but putting a financial bandage instead.
Payday loans and cash advances online are fast cash, but they end up being nothing more than bandages. A car title loan will help for a bit more time, but sometimes it infects the would more in the long run. Title loans will lend larger amounts of cash than cash advances, but the payoff is also much more difficult. Even though these short-term loans help the situation by providing easy fast cash, the payoff (loan plus fees) carries more damage.
A cash advance won’t hurt credit until it is sold to a collection’s agent.
There are several common activities which will negatively affect your credit. The lower your credit score, the less financial options will be available to you. If any of these behaviors fit your lifestyle, you will want to change them in order to help protect your credit score.
- Late payments will hurt your credit over time. A creditor may let one error slip depending on your history with them, but have it happen again and you should be prepared to see your credit drop. This action may vary depending on how late you are. If a creditor sees that you are late with other creditors, you may not get a forgiven first chance.
- Spending the maximum available balance. Just because a creditor gave you $5000 credit limit, it doesn’t mean they will reward you for using it. On the contrary having a high balance will show as a negative to creditors. If you can, pay off your balance each month or pay down as much as you can. Keep less than 30% of the balance used to keep your credit from being negatively affected by it.
- Applying for credit cards just because the opportunity is available is not good practice. Each time you apply for a loan (cash advances and payday loans are not included here) or a new line of credit, your credit score will go down a few points. Potential creditors that look at your credit history in the approval process is called a hard inquiry. These inquiries will take a few points off of your credit score for a year or two. Too many hard inquiries in a short time span will definitely hurt someone’s credit.
- Closing accounts will also hurt credit, especially if you still owe money to the creditor. Closing the account will affect the utilization rate used by the credit bureaus to figure your score. The credit bureau would rather see a long history with creditors.
