Article Mecca Information Source

Three Mistakes That Could Hurt Your Credit Score

We all know that that a good credit score is the key to low-interest loans and credit cards with good terms, but oftentimes people make mistakes on their credit histories without even realizing it. If you are interested in building your credit, or in keeping your credit history good, you should read the following suggestions. Who knows? You may just be making some mistakes that you’re not even aware of.

Mistake # 1

The first and most common mistake is missing payments or making late payments. This sounds obvious, but day after day, people continue to pay their bills late, not realizing that it is doing harm to their credit score. Every time you make a payment to any of your lenders, they report what amount you have paid, and whether you were on time or late. In addition, they will report how late you were, and your record of “lateness” will be represented on your report. What does this mean? If a potential lender sees that you were late two times last year, and only about a week each time, they may be able to forgive it, knowing that life simply gets in the way of on-time payments sometimes. But if it’s clear that you have a habitual pattern of paying your bills late, they will think twice about lending you money. What’s more, the later you are, the worse it will look in a lender’s eyes.

Mistake # 2

At first glance, it may seem like a good idea to close the credit card accounts that you aren’t using, but in reality, that could hurt your credit score. There are two reasons why this isn’t such a good idea.

First, if you have a good history with the credit card company, then you will be wiping off that history from your credit record. (Remember, everything that isn’t active automatically drops off your report after seven years.) You worked hard to build that history, don’t take it off!

Next, if you have a credit card that you’re not using, that means that you have available credit that you’re not using, and that can go a long way in adding positively to your credit score.

Instead of dropping the account, simply use it every now and then, pay it off in full when the bill comes and allow it add to your positive credit score.

Mistake # 3

Finally, shopping for credit can hurt your credit score. The credit agencies are notified every time there is an “inquiry” about your credit history, and if you get too many inquires, they will hurt your score. No one (except the credit reporting agencies) knows the formula for how many inquires will hurt your report, but the general rule of thumb is simply not to apply for credit unless it’s absolutely necessary. By doing so, you run the risk of having to pay higher interest rates, or being turned down for credit.

Pay attention to these three factors on your credit report, and keep your credit score in good shape!