Personal Finance

The Worst Things to Charge When Building A Credit Score

If you want to move freely through the modern world, you need a healthy, robust credit score. Your credit score is what everyone from potential landlords and mortgage lenders, to car salesmen and loan adjusters use to determine whether or not you are an acceptable risk for them to take. A good credit score can make your life easier, and it will open doors that remain firmly closed to those with no (or bad) credit. Building up that score sounds simple, too. All you need to do is get a credit card, buy some things with it, and then pay those purchases off. The longer you pay off all the purchases you make, the better your credit score will be.

Still, there are some purchases you should avoid when it comes to building your credit score. Things like...

  1. Indulgent Purchases

    One of the most common pieces of advice for building up credit is to buy small things with your credit card that you can easily pay off. Buy your gas with it, or buy an occasional pack of gum, or a cheeseburger. However, according to Go Banking Rates, you should avoid indulging yourself with your credit card. It puts you in the mindset that you have credit, so you can buy things, which can be a very slippery slope to go down.

  2. Loans

    It's a good idea to diversify your credit history, which means you should ideally have some loans in addition to a credit card history. If you have all of one, or all of the other, then your score won't be as healthy as it could be. With that said, one of the worst things you can do with your credit card is use it as a way to cover any kind of loan. CBS News (http://www.cbsnews.com/media/5-things-never-to-put-on-a-credit-card/) is explicit that you should never, ever use your credit card as a way to cover a down payment, or to make a payment on a loan. That quickly leads to a spiral of interest and debt that can grow out of control.

  3. Taxes

    If April is coming up, and you don't have the money to pay the tax balance you owe Uncle Sam, it is perfectly legal for you to pay that balance with a credit card. However, as USA Today points out, that's not a very smart decision. For one thing, there's an additional fee charges by the IRS for using a credit card, and that fee can be substantial if you owe the government a big balance. Additionally, the interest rate charged by your credit card is guaranteed to be higher than what the IRS would have charged if you'd called a tax officer to work out a payment plan to cover your balance.

Build With Purpose

It's always a good idea to build your credit score. However, with that said, it's equally important to make sure you make smart decisions, and that the charges you make to your credit card are actually going to help, rather than hurt, your attempts to improve that score.