Your credit score is a key part of your financial success. A bad credit score can make it more difficult to buy a car, qualify for a mortgage and even get accepted for many jobs.
If something is dragging down your score, you need to identify the problem as soon as possible.
Here are the five top things that could be hurting your score.
1. Sloppy payment history.
Nothing hurts your credit score more than missing a payment deadline. Just missing one payment can drag your score down by up to 100 points.
Considering that the highest your score can be is 850, you can see why missing a payment is so costly.
Be sure to plan ahead for all your minimum payments. If you’re worried you may forget, set up an automatic payment system with your bank for your bills.
2. Too much debt.
Carrying a lot of debt can also hurt your credit score, even if you’re making all the minimum payments on time.
The rating agencies look at your total outstanding debt versus your maximum credit limit. This ratio is known as your credit utilization rate. If this ratio is high, it will hurt your score.
3. Closing an old account.
Another part of your credit score comes from the average age of all your accounts.
If you just signed up for your first credit card today, there’s not too much you can do for this category.
However, one mistake you can avoid is closing an old account. While it might seem like a good idea to close an old credit card once you stop using it, this move will end up damaging your credit score.
Keep the card in a safe place and use it once or twice a year to keep it active.
“It’s very important to protect your
credit score however you can.”
4. Applying for too many new accounts.
Every time you apply for a new credit card or loan, the lender will make an inquiry into your credit score. Each time this happens, it temporarily drags down your credit score.
Applying for too many accounts at the same time can cause a noticeable decrease to your credit score.
5. A mistake on your account.
No one is perfect, not even the credit rating agencies.
If you feel like you’re doing everything right but your score is still low, call up the rating agencies and ask for a copy of your credit report.
Closely read through this document and make sure all the information is correct.
There may be an incorrect loan or a record of a late payment that never happened listed on your report. If that’s the case, this incorrect information is unfairly hurting your score.
You’ll need to call up the agencies and try to fix the problem.
It’s very important to protect your credit score however you can. By avoiding these top drags on your credit, you should stay in decent shape.
Photo source: experian.com.