If Las Vegas or Atlantic City are your ideal travel destinations because you love to gamble, luck is on your side: Gambling does not automatically hurt your credit scores. But before you sit down at the blackjack table or roulette wheel and lose a few hundred bucks, you need to know that even though this choice won’t directly harm your credit, it can still be a risky move.
There are certain gambling behaviors that can land your credit in hot water. You may want to avoid these practices to help you keep your credit scores in good shape.
Gambling Beyond Your Means
Hitting the casino or track can do major damage to your credit scores if you can’t afford to gamble in the first place. By gambling away funds you need to pay bills, rent or credit cards, you could end up missing a payment or even defaulting on a loan. Missed payments and defaulted loans can land on your credit reports and damage your credit scores. In fact, payment history is the biggest influencer of your credit scores, making up 35% of your scores.
If you can’t resist betting (and can afford to do so), you may want to set a budget limit before you begin. That way you know how much you can afford to lose and don’t go down the path that causes you to skip out on your other obligations. (You can see how your financial choices and behaviors are affecting your credit by viewing a free snapshot of your credit report, updated every 14 days, on Credit.com.)
Using Credit Cards
Perhaps you don’t have easy access to a casino, so you venture online to get the gambling rush. Most of these online gambling sites accept credit cards as a form of payment and with a few clicks, you’re given more gambling credits. This makes it very easy to rack up charges on your credit card as you chase an online jackpot.
This practice could be disastrous to your credit scores. The more you charge, the higher your credit utilization ratio. Most credit experts generally advise keeping a credit card balance no higher than 30% of your combined credit limits, ideally 10%, to have the best effect on your scores.
And, if you find yourself applying for multiple credit cards to fund a gambling habit, you could be damaging your credit score by putting too many hard inquiries on your credit report.
Taking a Cash Advance
Cash advances are another risky way to finance your gambling. Cash advances usually involve paying a fee and a higher interest rate (which generally starts accumulating right away) to get cash, putting the balance on your credit card. This is an expensive price to pay for cash, and it also raises your credit utilization ratio.
Although not extremely common, or available in every state with legalized casinos, some places offer markers, also known as casino credit. You can use these markers in place of cash so you can avoid carrying large amounts of cash, which you can later redeem if you win more than you put down. In some cases, you have to initiate payment, while in others, the casino will draw the funds from your account. It’s akin to writing a post-dated check. No interest is charged.
This is risky if you don’t pay or you don’t have enough cash in your account to cover the withdrawal. In this case, the casino can possibly pursue your funds through debt collectors or court, which could do significant damage to your credit scores. Also, some casinos may initiate a hard inquiry that can appear on your credit reports when you apply for casino credit, which — as we mentioned earlier — will have an effect on your credit scores.
If you have to worry about the effects of gambling on your credit reports, it may be better to avoid gambling. But if you do gamble, you might reduce the risk to your credit by sticking to a budget and avoiding risky funding options. Of course, gambling addiction is a very serious condition that has ruined lives. If your gambling is negatively affecting your life, you may want to seek help or treatment.
This article originally appeared on Credit.com and was written by Brian Acton.