5 Sneaky Ways You're Wrecking Your Credit Score
By Jihan Thompson
The most obvious way to blow your credit score is to make a late payment. Even if your credit score is solid, a single missed payment could cost you as much as 100 points, say many financial advisers. According to the Fair Isaac, the company that calculates your FICO score, payment history accounts for 35 percent of your total score. And that credit score will help determine what kind of rates you can score when applying for home or car loans. So first things first: Figure out your credit score.
Your FICO score, a number between 300 and 850, is based on five criteria: payment history, amounts owed, length of credit history, new credit, and types of credit used. You can find out yours at myfico.com. According to Experian National Score Index, one of the major credit bureau companies, the average credit score in America is currently 692. Those with scores well above 700 will qualify for the best interest rates out there.
But even if you pay your bills on time religiously, your credit score may be endangered. Here are five charge card sins that could cost you some precious credit score points.
CANCELING A CREDIT CARD.
canceling a credit card, credit score, improving credit score
canceling a credit card
We are often led to believe that taking a pair of scissors and snipping that charge monster to shreds is a good thing. But dont cut up those old cards so quickly. Your credit score takes into account credit history. Get rid of an old standby in your wallet and you could erase all those years you were an excellent bill payer. \r\n
USING MORE THAN 30% OF YOUR LIMIT.
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credit card limit
Lets say your credit limit is $5,000, and last month you charged $4,500. When the bill came around, you paid it off in full. Good, right? Wrong. Maxing out your credit card even if you can afford to only stands to hurt your credit score. Use just 30 percent of your credit card limit to boost your credit score.
CONSOLIDATING YOUR ACCOUNTS.
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consolidating credit card accounts
So youre considering transferring all your credit card balances to one card so youre only dealing with one bill every month. It sounds sensible, right? A big no-no, according to the keepers of the credit score. Think of it this way: One big balance looks a whole lot worse than multiple low balances. Appearances are everything.
ACCEPTING CREDIT LINE INCREASES.
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credit line increase
Being the responsible, on-time bill-payer that you are, your credit card company rewards you by upping your credit line. This isnt necessarily a bad thing, but remember how much you can afford to reasonably charge. Resist the urge to spend more or risk being unable to meet your new minimum payments.
NOT ASKING FOR WHAT YOU WANT.
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the credit you want
Dont accept everything your credit card company offers as written in stone. If you dont want that credit line increase, ask them to reduce it back to your old one. Had one late payment? If your record is squeaky clean, ask them nicely to remove the blemish from your credit history (which, remember, could cost you up to 100 points on your credit score). They could say no, but they could very well say yes because they value you as a customer. Ask anyway. Your credit score will thank you.\r\n
