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5 bad credit habits

It's essential to maintain good credit for a variety of reasons. From renting an apartment to purchasing a house to taking out loans, there are plenty of major financial plans whose success hinges on your credit score. Keeping your credit in top shape can be difficult, however, especially if you're dealing with debt.

If you're trying to build credit or improve a bad score, it's time to get serious about your financial habits. Read on to discover the five things you're doing that are detrimental to your credit:

1. Spending more money than you have
Credit cards equip you with a certain sense of freedom. If you can't afford to front the cash for a major purchase, you can always put it on your credit card and pay it off that way. While this perceived financial flexibility can come in handy during emergencies, it's an expensive mindset to get into. If you're using your credit cards to "live beyond your means," Bankrate explained, you're headed down a slippery slope toward crippling debt - and a credit score to match.

According to the source, if you can't get through the month without  putting necessary expenses - like bills and groceries - on credit, you're seriously overspending. Take a look at where you're dropping cash each month, and figure out a way to cut back on superfluous costs. Your credit card should be an expense that fits within your income, not a tool that allows you to spend more than you make.

2. Only making minimum monthly payments
It's easy to fall into a trap of only making the minimum monthly payment toward your credit card debt. Spending $35 per month is certainly affordable in a short-term sense, but it won't make a dent in your $2,000 credit card balance. Only putting the bare minimum toward your bill will keep you in debt for a long time, and may saddle you with extra costs from interest rates.

Credit.com recommended always paying as much as you can manage toward your monthly bill, since paying down debt is key when trying to improve your score. If you're unable to pay more than the minimum fee, it's time to go back to the drawing board and reassess your spending habits.

3. Maxing out
According to comparecards.com , maxing out credit cards is one of the worst things you can do for your credit score. Not only does this habit cause you to accrue more debt, it also negatively impacts your credit utilization ratio. People with good credit scores tend to have CURs lower than 30 percent, while constantly maxing out will saddle you with a CUR of 100 percent. If maxing out is part of your monthly routine, it's time to stop using your card and start tightening your purse strings.

"Maxing out your credit cards should never happen," the source explained. "Using credit to pay for things you cannot afford is a seriously bad habit when trying to improve a credit score. This shows lenders that you are experiencing financial difficulty already, and any applications will likely be declined."

4. Agreeing to co-sign a loan
It can be difficult to turn down a friend or family member who asks you to help them out financially, but it's rarely a good idea to co-sign a loan, explained Bankrate. That's because the debt in question not only affects the primary signer's credit, but the co-signer's as well. So if you help your brother purchase a house and he defaults on his mortgage, your credit score will drop, and you may even be held responsible for the remaining balance.

5. Ignoring your situation
Your credit statement can be a difficult pill to swallow, but pretending it doesn't exist will only exacerbate debt and prevent you from reaching financial health. Credit.com explained that reviewing your monthly statements will not only clue you in to your payment due dates, account fees and spending habits, it will also hep you catch fraud and identity theft. Being forced to examine every item you're charging to your credit card can also help you refine your budgeting habits.

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