Do you know Five Ways to Wreck Your Credit Score?

 

It’s becoming more and more obvious that credit scores have an influence on many aspects of our lives. In many cases employers will look at an applicants credit score   before they consider hiring a new employee.  We all know that a bank bases its decisions as to whether a loan will be approved  after looking hard a the applicant’s credit scores. You’ll possibly be surprised to learn that insurance companies often look at your credit scores prior to underwriting your insurance policy.

Most people understand that retaining the best score they can is vital. But, your credit score can be severely damaged if you’re not vigilant!

So remembering what we’ve just said we need to do whatever we can to avoid these top five mistakes:

1. Maintaining high balances. A big percentage of your credit score is governed by what fraction of your available credit you’re making use of. If, for instance, the  total limit on your credit cards is $27,000 and you owe a  total $21,000, then you would be making use of 75% of your available credit.

So the closer to zero we can get this number is to zero, the better our credit score wil be.

 Although no one knows for sure, most experienced observers of the credit world feel that the the magic number is 30%. So if you’re making use more than 30% of the credit available to you , then your score will be lower because of it.

2. Not paying your bills on or before their due date.The biggest component  of your credit score is controlled by how good you are at paying your bills on or before the due date. Businesses don’t usually notified the credir bureaus  untilyou’re at least 30 days late. If you pay your bill 30 days after the due date, then your credit score is lowered. Your score is lowered even more if you’re 60, 90, or 90+ days late.

So we should aim to pay our bills on time and, with our payments, pay off whatever we charge during the previous month. If we do this the credit bureau will raise our score for both timeliness and total credit use.

3. Not keeping an eye on your credit score. People experienced in dealing dealing with credit and finance advise that many credit reports have mistakes and these mistakes might not be for  your benefit. As a bare minimum, ensure you ontain a copy of your credit report every year.  When you receive it examine it carefuly  checking  for any incorrect disparaging material and pursue the dispute process to correct any errors..

As a general rule of thumb, it’s wise to examine your credit report at least 90 days prior to making a credit application. You might be surprised to know that it can take up to 90 days  to get any errors corrected. So always make sure that you plan ahead.

4. Stopping your credit. Quite a few financial experts suggest that we cut up our credit cards and get rid of them. This is good advice. But it’s important that we don’t close the accounts. This is connected to item 1.

To illustrate this,  picture yourself with $20,000 of total credit available to you (2 cards at $10,000 each). If one card has a zero balance and the other has

a $5,000 balance, you’re using 25% of your credit. If you go and  cancel the

card with a zero balances, now you’re making use of 50% of your available credit.

In an ideal world we would have a lot of credit available to us, but also have a balance that is as low as possible.

5. Limit the amount of credit that you have.

It is commonly believed that the right way to get a good credit score is to have only one credit card and not to carry a balance on that card. However, the right way to get a higher credit score is to have some varied forms of credit on your report.

One or two credit cards, a store card, plus a car loan is a much better arrangement. Even though the car loan isn’t still open, the fact that you had a car loan previously is OK. Just ensure that you have a number of different forms of credit in your credit history.

If you have a high credit score life is a lot simpler. Obtaining credit when you require it is easier, and also the credit that you obtain will be much cheaper, as well. Your credit score plays a large part  in determining the interest rates you pay on loans. So your main task is to get your credit score as high as you can. Then you’ll save heaps of money during your life time.

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