7 Deadly Sins To Destroy Your Credit Score
August 27th, 2008Since it is pretty well established that having a good credit score can mean lower interest rates on loans, mortgages and credit cards, it is certainly worthwhile getting to know the truth about credit scores. Most people are misinformed about the effects that certain financial actions have on their credit score. Hopefully this will clear up some common misconceptions.
Cancelling Old Credit Cards - This can be a big mistake. An old credit card that is an long standing part of your credit history can actually have a positive effect on your credit score. The length of your credit history is one of the things tha will count to your advantage on your credit score, so having an old credit card helps rather than hinders. It can account for up to 15% of your score. If you really don’t want the card, then consider just putting it in a draw somewhere and forgetting about it. Cancelling it is not usually a good option.
Not Using Credit - A large part of your credit score revolves around how you deal with your existing loans and credit cards. If you don’t use credit at all, then it is difficult to build that credit history. Even if you try to use cash for everything, you should consider putting the occassional item on credit and paying it off so as to build your credit history.
Scrambling for Credit - One thing that has a negative impact on your credit score is applying for multiple cars or loans in a very short space fo time. This is often as sign of financial difficulties and can result in credit providers viewing your credit negatively. Try not to apply for too many cards at one time.
Giving False Information - Never, ever attempt to be misleading on loan or credit card applications. If you are caught (and it is easy to get caught) then this can really destroy your credit score and make it exceptionally difficult to get credit in the future. Be honest, act with integrity and it is possible to improve your score. Be deceiptful and you can destroy it all.
Allowing Debts to go Over a Month - A very big portion (35%) of your credit score is based on debts that you fail to repay within 30 days after the due date. If you are going to be late paying a bill, then make sure it doesn’t go longer than 30 days. You may even want to try calling your creditor to let them know that you are currently aware of teh debt and making arrangements to pay it.
Starting a Credit History Too Late - Having no credit history really isn’t that much better than having a bad credit history. Consider getting and using a credit card (responsibly) even if you don’t think you need it. Getting a credit card at a young age and training to pay it off every month can help establish a long and reliable credit history. Get started now and see the benefits when it comes time for you to start getting loans.
Not Knowing Your Credit Score - Keeping tabs on your credit score is easy, free and recommended. Creditors make mistakes and some of those mistakes make their way onto your credit score. By getting a copy of your credit report every year, you can take steps to correct those mistakes and also know where you credit score stands.