Your credit score is one of the most important factors of your financial life. While knowing your credit score is an important part of managing and maintaining your financial health, knowing just isn’t enough. It’s really important to know what are good financial habits and understand the actions that could hurt your score.
Here are 4 of them.
Maxing out your credit cards – While paying your bills on time positively influences your credit score – it’s not the only thing that matters. Even if you are never late on payments, carrying high balances on your credit cards on a regular basis will negatively affect your credit score.
Best practice is to keep your credit utilization ratios (the ratio of your credit card debt to credit limits) down by keeping your usage to about 10 to 20%.
Late or missing payments – Making a late payment on your credit card, mortgage or loans or medical bills can lead to negative consequences that could sink your credit score and damage your credit health. Whether you are just three days late or 30 days late, not paying your bills on time could affect you for months and potentially years to come.
The bottom line? One slip up and your credit score may take a dive, even if you have otherwise stellar credit.
Multiple Credit Report Inquiries – When you are shopping for a new car and the dealership runs your credit multiple times, your credit score could take a hit. When you are shopping for loans, a lender will do a hard inquiry on your credit, meaning they pull your credit report to check your history and credit score to determine approval for your loan application. Hard inquiries show up on your credit report for two years. A lender may perceive a consumer who has had too many credit inquiries as desperate for credit or as a potential credit risk.
Be mindful of how many different lenders you apply for an auto loan with, because it can add up to a drop on your credit score.
Too many new opened accounts – Opening several new credit accounts in a short period of time represents a risk – especially for people who don’t have a long credit history. Why? It is believe that people who apply for credit multiple times within a short time period tend to over-extend themselves and are more likely to default at some point. Typically credit inquiries of this type have a small impact on one’s scores and while it isn’t the biggest factor, the appearance of “new credit” does influence your score.
When looking for a new credit card, spend time determining what the best credit card is by reading about the features of each card and then only apply for the one that has the features you want from a new card.
If you have any questions about your credit score, financial health or credit reports – give me a call or email me.
THD Credit Consulting • (800) 822-7120