How To Completely Ruin Your Credit Score
Could you be hurting your credit score without even knowing it? Many different actions that people routinely take can have a negative impact on a credit score. Knowing how your credit score is calculated will help you make better credit decisions. It can also help you clean up your credit report before applying for a loan.
Cancelling Old Accounts Is Not A Good Idea
Getting rid of an old account may seem like a good idea at the time. However, the only time that you should cancel a credit card is if you are being charged an annual fee. Older credit accounts are great ways to prop your credit score up. The average age of your credit accounts should be as old as possible. This establishes that you have experience with credit.
Not Making Payments On Time Can Hurt Your Score
Missing just a single payment could have significant consequences for your credit score. Lenders will report to the credit agencies any payment that is made more than 30 days late. This could drop your credit score by as many as 50 points. A missed payment could be enough to trigger a repossession of your property. Repossessions can be a huge black eye on your credit report.
Debt Relief Is Not Credit Score Relief
Relying on debt relief services to help with your credit issues will not sit well with your creditors. Most creditors are going to take punitive action against you as they suspect you are not able to handle your debt obligations. One common action is to freeze any open credit account. This will lower the amount of available credit that you have. Other creditors may decide to treat debt relief services much like filing for bankruptcy. This could destroy your credit score until your issues are addressed.
Using Too Much Credit Can Hurt Your Score
It is a good idea to keep your credit usage to a minimum. You should be using no more than 50 percent of your available credit. Using any more than that can cause your credit score to take a hit. The good news is that reducing this amount can be an easy first step to repairing your credit. Think about paying cash for anything you can afford to pay off right away.
Your Mix Of Credit Is Important
Having a variety of different loans could work to your advantage. Lenders like to see that you have experience with a mix of secured and unsecured lines of credit. If you have student loans, you might want to consider adding a credit card to that mix. Adding a car loan to your existing credit cards would be another way to add a better balance to your credit portfolio.
Very few large purchases can be made without a solid credit score!
Your credit score is going to be a handy tool throughout your life. Buying your first home will never happen if your credit score is not where it needs to be. Understanding the ways you are hurting your credit score will give you the best chance to make the proper adjustments.