People are concerned, rightly so, about their credit scores. A lot of people are trying to do what they can to increase their credit score. While a commendable goal, there are some things you should NOT do. Here are 5 things you should not do.
1. Cancelling old credit cards.
Approximately, 15% of your credit score comes from the length of your credit history. If you want to reduce the number of credit cards you have, then you should cancel the newest ones first. If you cancel the older ones first, then the length of your history will look shorter and you will have a reduced credit score.
2. Staying current on some or most of your cards.
About 35% of your score is based on punctuality of your payment, with only payments that are more than thirty days late affecting your score negatively. If you’re going to be late on any cards, make up that payment before it is thirty days late. Juggle the timing of your payments if you need to, but make sure no payment gets more than 30 days late.
3. Having too many open lines of credit.
Roughly, 10% of your score comes from the types of credit used. If you have a lot of sources of revolving credit, such as credit cards, you can be seen as a credit risk. Why? Because you have the potential of racking up a lot of debt very quickly. Don’t take those retail credit cards just to save 10% or 15% on the first purchase.
4. Maxing out your credit cards.
Almost, 30% of your score comes from the ratio of your credit card debt and your credit limits. Therefore, if all of your cards are used to the credit limit, your credit score is suffering even if you are able to keep up with the payments. Stop buying more and start using the money to make extra payments and pay down your credit.
5. Avoiding loans and debts.
In the eyes of your credit report, having no debt is basically having bad debt. If you do not want credit cards, you should still consider getting one card and making an occasional purchase with it. Pay it off when the bill comes. It is bad to not run up any debt. If you have no credit score, it can negatively impact things like your insurance rates.
These are 5 simple mistakes that you can avoid with your credit. Do not make these mistakes. If you are concerned about your credit score, contact me for a free consultation.