Knowing how to avoid mistakes, when it comes to your credit score, can be the difference between an ideal score and a poor score. Some of these mistakes can be hard to detect, and may even seem like the exact opposite of mistakes! But you need to make sure that you are fully informed before making any serious decisions. Making big mistakes, like the one I’m about to reveal, can cause your credit score to drop significantly. This can then lead to less-than-favorable credit terms or loan offers when you do decide to apply. The big mistake that I’m referring to is applying for many different credit accounts or loans within a short period of time.
When applying for several different credit accounts, it’s easy to forget how this will be perceived by creditors and lenders. You need to be thinking like one of these companies. When they see a person applying for several different accounts in a very short period of time, the only thing that is going through there head is, “This person has got to either have money problems, or is desperate to receive credit.” These are the kind of thoughts that you don’t want companies to have about you when applying for credit. I know it’s easy to fall into this trap, with all the heavy promoting these companies do to get people to open new accounts. But one of the biggest mistakes you can make, when it comes to your credit score, is to apply for a bunch of different loans or accounts, in a short period of time. So protect your score, and avoid this very common mistake.
Another huge (and common) mistake that people make, is not using their oldest credit accounts every now and then. A significant determining factor, when it comes to your credit score, comes from your credit history. In order to have a credit history, you need to have old credit cards and accounts. If you make sure that you use these cards every couple of months, this activity will be reported to the major bureau’s and your credit score will reflect that in a positive way. Just make sure to pay off the purchase immediately, to avoid any further damage to your score.
A big mistake that many consumers make, in the erroneous belief that this step will help improve their credit score, is to lower the available credit limit on accounts which are open. This has the opposite effect of what is usually intended, and can drop your credit score significantly. This can seem ironic, because you are trying to minimize your use of credit and it hurts your credit score instead of boosting it. The bigger the difference between the available credit that you have and the balances that you owe on this credit, the higher your credit score will be. If you make the mistake of lowering your credit limit and available balance, this step will backfire, and severely hurt your credit instead. This is due to the fact that the gap between these two figures will be smaller, so you will probably be considered a higher credit risk and receive a lower FICO score.
The biggest mistake that you can possible make, and the one that will affect good credit in a large way, is to make any of your payments late. Late payments are like death to a great credit score, and even missing a single payment by as little as one or two days can cause your credit score to drop like a stone in a deep lake. This one mistake can take your credit score from good to poor in a very short time, and may be responsible for your credit score to lower by one hundred points or more.
Consolidating your credit accounts can also be a big mistake, even though this may seem like a good idea and a way to repair your credit if it is less than perfect. A common practice is to transfer high interest account balances over to a credit card which has a lower balance, but you should avoid doing this if at all possible. A better way to protect or repair your credit score is to evenly spread out your credit card charges over all of the cards you have. This improves the gap between your balance and available credit, and will boost your credit score instead of harming it.
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