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101 Powerful Tips for
Legally
Improving Your Credit Score
Avoid Common Credit Score
Mistakes
Page 1 of 2
There are a few things that
people do without realizing it that have a bad effect on their
credit score. Follow these tips to avoid the common traps that
can sink your credit risk rating:
Tip #11: Beware of debts
and credit you don’t use.
It is easy today to apply
for a store credit card that you forget all about in three years
- but that account will remain on your credit report and affect
your credit score as long as it is open. Having credit lines
and credit cards you don’t need makes you seem like a worse
credit risk because you run the risk of “overextending” your
credit.
Also, having lots of
accounts you don’t use increases the odds that you will forget
about an old account and stop making payments on it - resulting
in a lowered credit score. Keep only your used accounts and
make sure that all other accounts are closed. Having fewer
accounts will make it easier for you to keep track of your debts
and will increase the chances of you having a good credit score.
However, realize that when
you close an account, the record of the closed account remains
on your credit report and can affect your credit score for a
while. In fact, closing unused credit accounts may actually
cause your credit score to drop in the short term, as you will
have higher credit balances spread out over a smaller overall
credit account base.
For example, if your unused
accounts amounted to $2000 and you owe $1000 on accounts that
you have now (let’s say on two credit cards that total $2000)
you have gone from using one fourth of your credit ($1000 owed
on a possible $4000 you could have borrowed) to using one half
of your credit (you owe $1000 from a possible $2000). This will
actually cause your credit risk rating to drop. In the long
term, though, not having extra temptation to charge and not
having credit you don’t need can work for you.
Tip #12: Be careful of
inquiries on your credit report.
Every time that someone
looks at your credit report, the inquiry is noted. If you have
lots of inquiries on your report, it may appear that you are
shopping for several loans at once - or that you have been
rejected by lenders. Both make you appear a poor credit risk
and may affect your credit score. This means that you should be
careful about who looks at your credit report. If you are
shopping for a loan, shop around within a short period of time,
since inquiries made within a few days of each other will
generally be lumped together and counted as one inquiry.
You can also cut down on the
number of inquiries on your account by approaching lenders you
have already researched and may be interest in doing business
with - by researching first and approaching second you will
likely have only a few lenders accessing your credit report at
the same time, which can help save your credit score.
Tip #13: Be careful of
online loan rate comparisons.
Online loan rate quotes are
easy to get - type in some personal information and you can get
a quote on your car loan, personal loan, student loan, or
mortgage in seconds. This is free and convenient, leading many
people to compare several companies at once in order to make
sure that they get the best deal possible.
The problem is that since
online quotes are a fairly recent phenomenon, credit bureaus
count each such quote estimate as an “inquiry.” This means that
if you compare too many companies online by asking for quotes,
your credit score will fall due to too many “inquiries.”
This does not mean that you
shouldn’t seek online quotes for loans - not at all. In fact,
online loan quotes are a great resource that can help you get
the very best rates on your next loan. What this information
does mean, however, is that you should research companies and
narrow down possible lenders to just a few before making
inquiries. This will help ensure that the number of inquires on
your credit report is small - and your credit rating will stay
in good shape.
Tip #14: Don’t make the
mistake of thinking that you only have one credit report.
Most people speak of having
a “credit score” when in fact most people have at least three or
more scores - and these scores can vary widely. There are three
major credit bureaus in the country that develop credit reports
and calculate credit scores. There are also a number of smaller
credit bureau companies.
Plus, some larger lenders
calculate their own credit risk scores based on information in
your credit report. When repairing your credit score, then, you
should not focus on one number - at the very least, you need to
contact the three major credit bureaus and work on repairing the
three credit scores separately.
Tip #15: Don’t make the
mistake of closing lots of credit accounts just to improve your
score.
This seems like a
contradiction, but it really is not. Many people think that to
improve their credit score, they just have to pay off some debts
and close their accounts. This is not exactly accurate. There
are several reasons to think carefully before closing your
accounts.
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