Credit Score Do’s and Dont’s

Thu, 27 Aug 2009 05:19:59 +0000

There are so much advice out these about how to improve your credit score and what you should do to maintain it. Here is a quick list to help you know what is best for your credit score.

Do: Pay your Creditors on Time

This seems obvious but is a struggle for many individuals. This is actually the single worse thing you can do to your credit score becuase your payment history carries such a large weight.

Don’t: Close Old Accounts You Don’t Use

First, closing old accounts could hurt your credit history. More specifically the average of all your accounts. This is a another major factor in your credit score and closing old account will skew the average. Also, you will lower the total available credit you have and thus raise your debt to credit ratio. Another factor that will weight against you in the credit score formula.

Do: Use a Budget Each Month

You need to know where your money is going at all times. A budget is essential to ensure you pay everything on time and pay down any debt you have. This will prevent you from saying at the end of the month where did my money go?

Do: Check Your Credit

You are allowed access to your credit reports free one time a year so take advantage of it. Creditors sometimes make mistakes and you need to check to see if your report is accurage. Cleaning your report of potential errors is a great way to get an instant boost to your credit score.

Don’t: Think You Can Close An Account To Make It Go Away

Many times individual will have an account that has many delinquencies and other issues, but thinking if you close it to make not appear on your credit report is wrong. It will stay on your credit report so there are many times no reason to close it and again you might be hurting your debt to credit ratio.

Do: Shop for Auto Loans and Mortgages

Sometimes you might hear the credit myth that shopping for credit will kill your score because of the credit inquires. Well, this isn’t exactly true. Consumers are allowed to shop for loans that represent a large purchase such as a mortgage or auto loan. They are not suppose to shop for unsecured loans like credit cards. These you know the terms up front and there is no need to shop.

Well, again these are just a few and there are many more, but hopefully there will be more of these down the road for me to write about.

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Credit Score Myths

Sun, 08 Mar 2009 20:06:23 +0000

There are many Credit Score Myths out there that people hear. Here are some of the Credit Score Myths and the truth behind them.

Credit Score Myth 1: Closing Old Accounts Will Improve Your Credit Score

One Credit score myth that people often believe that you can improve your credit score by closing old accounts. The truth is the usually the opposite. There are two ways it could actually hurt your credit score. First, is your credit score utilization which makes up 30% of your credit score. This is calculated by dividing your account balances by your credit limits. Since you will have less of a total credit limit you will be dividing by less. This will cause your credit score utilization to rise. Since the lower the utilization the better for your credit score you have just done the opposite.

Second is your credit score wants a long credit history. This makes up 15% of your credit score. Your credit history takes into account the average age of all your accounts and the age of your oldest account. Usually when individuals close accounts it is an old account that they no longer use. This could hurt your average account age. Also, if you don’t know which is your oldest account, you could wind up closing that one. This will definitely hurt your credit score

Credit Score Myth 2: Lowering Limits Will Improve Your Credit Score

This is another thing individuals think they can do to improve thier credit score. The truth is it has the same effect as closing an account for your credit utilization. It will cause the utilization percent to rise. And this could hurt your credit score

Credit Score Myth 3: Shopping Around For New Credit Will Hurt Your Score

The answer to this credit score myth is yes and no. That is becuase your credit score allows you to shop for some credit and not for others. You are allowed to shop for mortgages and auto loans, but not credit cards. That is becuase these are recognized as large puchase that smart consumers shop for. Credit cards on the other hand are a one time deal. You have to select the one you want before applying for ten. Doing this with credit cards will hurt your score.

There are many other credit score myths and I will try to post some others.

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