All, Credit Report

How to hurt your credit score

Gone are the days when lenders gave to credit to anyone who asked. Today, the rules are tightening up and the lenders are closely looking at your credit report before deciding on giving you that loan. In these economic times, one should have the best possible credit report and score. Believe it or not, many people do things to their credit report that simply hurt their score and lower their chances of obtaining loans or credit cards.

If you’re thinking about borrowing in anytime soon, make sure that you do not do any of these mistakes that will hurt your credit score:

Closing accounts
If you want your credit score to plummet faster than a c list celebrity’s status, simply close some of your accounts! By closing your account, you’re cutting away at your available credit and also increasing your debt to credit ratio.

The credit scoring system isn’t built around common sense as you assumed. A lot of people think that closing an account that is paid off or barely used is a good thing, but they’re wrong! When an account it closed, the available credit on that closed account no longer adds to your total available credit.

A good chunk of your credit score is determined by the ratio of debt to credit. The lower your debt to credit ratio, the higher your score. As a rule of thumb, don’t close accounts, especially if they have a high available balance. Simply pay off the balance and leave the account open. If possible, keep the account active by making small purchases every now and then simply to report history.

It is a good idea to close accounts only when their available credit is low and if they’re new accounts. It is especially good to close accounts if the above criteria match and the cards have a high interest rate or charge annual fees.

Not using credit cards
A lot of the credit card companies are closing accounts that aren’t being used. That’s right; they’re taking on a use- it or lose-it mentality. In these economic times, credit card companies are afraid of just letting anybody sit on a pile of credit.

If you have an account that has a lot of history, it is a good idea to keep that account active by using it every so often. If your account gets closed, it lowers your total available credit and could cost your some points on your credit score.

Continue to page: 1 2 3