We all probably need information on keeping our credit score in good standing. Here is some important information regarding credit do’s and don’ts.
Steer clear of these 10 things experts say can mangle your score. via FreeCreditReport
- Don´t avoid using credit. If you don´t use credit, you won´t have much of a credit score. “A credit score is an important tool companies use to protect themselves,” Sweet says. The lower the score, the higher the risk, and this can affect whether or not a loan is approved
- Don´t miss payments. Paying a bill late will hurt your credit, but missing a payment will damage it even more. “If you do so, you can´t make it up,” Sweet says. In other words, making two payments in the next billing cycle will not remove the blemish from your credit report. Whether or not you pay your bills on time determines 33% of your score.
- Don´t limit loan types. Despite what your bank account may state, a car payment and a mortgage may not be enough. Also managing an installment debt, such as a credit card, is a good indicator of credit savviness. There are five elements to the credit score model and revolving credit, which allows consumers to charge and owe different amounts each month, is one of them. “It´s 10% of the score,” says Gail Cunningham, Vice President of Public Relations for National Foundation for Credit Counseling.
- Don´t close unused credit card accounts. Actually, just use caution, says Sweet. A factor in credit score models is your utilization, which is your debt vs. how much is available. For instance, if you owe $4,800 on a card with a $5,000 limit, you´re using most of your available credit and this “utilization” will have a negative impact on your score. Counting toward 30 percent, your utilization is the second highest factor in your credit score. You should charge no more than 30% of your available credit, recommends Cunningham.
- Don´t be a credit tease. Don´t run up charges all over town or apply for several cards at once while looking for the best rewards program. Recent inquiries means that you have accessed your credit and this can affect your score negatively. “This signals that you´re desperate for credit and don´t have enough cash available for your purchases,” says Cunningham. She adds that if you are shopping for a major purchase, such as a mortgage or car loan, the inquiries will usually roll together into one.
- Don´t rob Peter to pay Paul. Don´t charge anything unless you know how and when you are going to pay it back. One of the benefits of credit is the ability to spread out payments on a big purchase, not to delay paying with hopes that the money will come in – from somewhere. If you need to use a credit card for convenience, use a prepaid card or a secured card that enables you to make payments to your own line of credit.
- Don´t get on the call list. When a debt turns into a collection account, it´s an indication that you got yourself in hot water. Once a collection agency jumps into the arena, it becomes the owner of the debt, which will show on your credit report. Trying to make payments to the original debtor will not make the collection agency or the negative mark on your credit go away.
- Don´t forget the little things. That library fine you didn´t pay or the health club contract you signed but didn´t honor can show up on your credit report. Any debtor has the right to report unpaid bills to the credit bureaus, and many of them exercise that right.
- Don´t negotiate. On paying less than what you owe, that is. If you cannot repay a debt in full and a creditor agrees to settle for less than you owe, you haven´t won the battle. Instead of negotiating to lower the overall amount of the debt, ask to have your interest rate or monthly payment lowered so that you can continue to pay the debt off in full.
- Don´t give up. If you have late payments, missed payments, defaulted loans, and similar credit mess-ups in-between, don´t give up and think that your credit report is ruined. Although offenses like these generally stay on your credit report for seven years, the recovery clock doesn´t start ticking until you have one full month of paying all of your debts on time, says Sweet.