2. You’re Only Making Minimum Payments on Your Credit Card
“If you owe $10,000 on a credit card, and you’re paying just $140 each month, for example, it will take you 25 to 30 years to pay it off,” Gavlak says. What’s more, you’ll pay thousands in interest—and your credit score will likely suffer because of the high-utilization ratio.
Gavlak says this might surprise those who mistakenly believe that carrying a balance helps build a solid credit history. But the only real way to build great credit—and wealth—is to pay off everything you charge at the end of the month.
What to Do
Develop a plan for wiping out your debt for good—even if it means making tough sacrifices in order to triple or quadruple your monthly payment, or seeking other consolidation methods, like applying for a balance-transfer card.
You can also consider a personal loan through sites like Upstart and Prosper. “These sites [require] higher payment amounts [in exchange for] lower interest because they are for shorter time frames,” Gavlak says. “This can help you if you’re not disciplined enough to pay higher monthly amounts on your own, and you can be in a better situation in two or three years.”
