10 Mistakes You Should Avoid When Managing Your Credit


Forming good credit habits is an important step toward improving your personal finances. The average American holds an average of $5,315 in credit card debt. Combined with mortgages, student loans, auto loans and other outstanding payments, the average total debt per person in the United States is $92,727, according to Experian.

Although debt is widespread, here are some common mistakes you can avoid when using credit in the future.

1. Paying Only the Minimum Amount

A couple pays their bills.

Credit card companies may seek to convince customers that it’s a good idea to make only their minimum payment every month. Often, a borrower is required to pay just 2% of a credit card bill.

Only about 33% of Americans pay off their credit balance completely every month. But whittling down your debt over a long period enables credit card companies to make more money because interest accrues over time.

Paying more than the minimum balance will ultimately cost less and give you greater control over your finances. Aim to pay your balance in full every month to avoid costly interest.

2. Being Blissfully Unaware

A woman stuffing an envelope.

“Pain of paying” describes situations where it pains a customer to use cash rather than a credit card. But when you use a credit card or take out a loan, you don’t physically handle your money and can quickly become oblivious to the amount you are spending.

To avoid this mistake, try putting cash in envelopes at the beginning of every month and only spending what’s in them. When you run out of the allotted amount, refrain from buying. You can also delete your stored card information from online stores, so it becomes more difficult to make a purchase.

3. Buying Something Because Others Want It

A woman holds various shopping bags.

You may buy things on credit to keep up with your family and friends or even compete with other people. For example, have you ever gone to an auction and bid higher and higher because other people around you were bidding, too?

A psychological concept known as social facilitation describes the way one’s behavior changes depending on his or her social surroundings. When it comes to buying, social facilitation can lead you deeper and deeper into debt.

Before rushing out to buy the latest products, stop and think about whether you actually need them. If you do, buy with cash to make your shopping experience take on more financial meaning.

4. Losing Sight of the Bigger Picture

 A young man writes in his notebook.

It may be easier to buy a small product now, even if it interferes with your future savings goals. That’s because the human brain has been trained over millennia to appreciate instant gratification.

To combat this, write down your long-term goals and keep them in mind when you’re tempted to spend.

For instance, if you want a pair of expensive shoes, remind yourself that you’re not buying them because you prefer to pay off your debt and buy a house in a year from now instead.

5. Buying Something Because It’s a “Good Deal”

A woman celebrates while looking at her computer.

You may be tempted to buy something because it’s a good deal, even if you never planned on purchasing it in the first place. For example, if a blender normally costs $150 but is on sale for $100, you might convince yourself it’s a great deal, even if the $150 price point was completely inflated.

Instead of concentrating on the $50 you’re saving, think about the $100 you’d be spending. Then, you might hesitate before purchasing something that’s a “good deal.”

6. Ignoring Your Credit Report

An unworried man stares at the sky.

You may think that if you don’t look at your credit report, it doesn’t exist. If it’s out of sight, it’s out of mind and also out of your control.

However, being hands-on about your credit report and score can ultimately help you. What if your score is sinking and you have no idea? What if someone used your credit card and now negative reports are showing up?

By looking at your credit score and full report regularly, you can spot errors, correct them and figure out your spending patterns. If your score is low, you can take the necessary steps to improve it.

7. Focusing on Too Many Debts at Once

A group of overwhelmed people.

You already know that one common credit mistake is to only pay your minimum balance. But it’s also a mistake to focus on paying off the balances of multiple cards and debts at once.

Whether you choose the avalanche method where you pay your highest-interest debts first or the snowball method where you pay the lowest-balance debts first, make a strategy to avoid feeling overwhelmed when it comes time to pay your bills.

8. Making Emotional Purchases

A woman makes a purchase online.

When you’re upset, do you go on a shopping spree? Do you buy things because you feel like you deserve them?

Things may not make you as happy as you think. When you have a large credit card balance at the end of the month, you may realize you’ve made emotional purchases instead of logical ones.

Try to find different ways to healthily cope with your emotions instead of spending, such as hanging out with your significant other and/or kids, going to therapy, cooking yourself a delicious meal, exercising, talking to a friend, reading a good book, cuddling with your pet or watching a movie.

9. Diminishing Your Success

A man holds multiple receipts.

When you pay off one credit card, you might just say, “OK, on to the next one,” rather than stopping to give yourself a breather to evaluate everything you’ve accomplished.

To avoid this mistake, be gentle and reassure yourself that everything takes time. Find healthy ways to reward yourself for your accomplishments, such as watching your favorite Netflix show or taking a walk in a beautiful park.

10. Not Having a Reason for Paying Down Debt

A woman lies on the couch.

You may truthfully intend to stop spending and pay down your debt, but if you have no motivation to actually do it, it’s never going to happen.

It’s critical to list your financial goals.

Perhaps you want to buy a house, go on a vacation, save money for your child’s education, redo your kitchen or purchase a new car. By coming up with your own list, you will be able to keep your eye on the prize.

How to Improve Your Credit Score if You’ve Made Common Mistakes

There are a few steps you can take to improve your credit score, and put yourself in a better financial position even if you’ve made common credit mistakes in the past:

  • Try not to close any of your credit cards, as your credit utilization rate will increase and your score could go down. Keep in mind that your credit utilization rate should be below 30%.
  • Don’t open new lines of credit, especially if the interest rate is high.
  • Catch up on late payments to keep your account up-to-date and minimize any weak marks in your credit history.

Expert Insight

MoneyGeek discussed common credit mistakes with experts and found out why people are making them and what they can do to avoid these mistakes.

  1. What do you see as the most common credit mistakes people make?
  2. Why do people make these credit mistakes?
  3. What are some strategies you’d recommend for people to break out of these credit mistakes?
  4. What else would you like people to know about consumer behavior as it relates to credit?
Jacqueline Doremus
Jacqueline Doremus

Associate Professor of Economics, California State Polytechnic University, San Luis Obispo

Rod Griffin
Rod Griffin

Senior Director of Consumer Education and Advocacy, Experian

Talya Miron-Shatz
Talya Miron-Shatz

Visiting Researcher, Cambridge University

Andrea Woroch
Andrea Woroch

Money-Saving and Finance Expert, Writer and TV Contributor

Dr. Brian J Adams
Dr. Brian J Adams

Associate Dean of Graduate Business Programs and Professor of Finance at the University of Portland's Pamplin School of Business

Michael Manahan
Michael Manahan

Lecturer at California State University, Dominguez Hills

Dr. Christopher Calvin
Dr. Christopher Calvin

Assistant Professor, Department of Accounting at the University of Dayton

Michelle Waymire
Michelle Waymire

Financial Advisor/Financial Coach, CFA, CFP & Founder of Young & Scrappy

Laurie Meamber
Laurie Meamber

Associate Professor of Marketing at George Mason University

About the Author


Kylie Ora Lobell is a freelance copywriter, editor, marketer and publicist. She has more than 10 years of experience writing in the personal finance, legal and business space for publications and brands like Legal Management Magazine, LegalZoom, Forbes, EMC, IBM, Dell, Mastercard, Visa and NCR. Her bylines include The Washington Post, The Los Angeles Times, The Jewish Journal of Los Angeles, New York Magazine and Time Out NY/LA. Her website is KylieOraLobell.com.