What Destroy Credit Score

Your credit score not only determines whether or not you can get a credit card, mortgage, or auto loan, it’s also a critical factor in determining the interest rate you have attached to those items. A low credit score can cost a lot of money over your lifetime.

Not everyone is aware of the many factors that determine a credit score. It’s easy to make assumptions that seem logical, but are actually false. Acting on incorrect beliefs is a sure way to make a critical mistake.

Save money and make your financial life easier by avoiding these seven credit destroyers:

1. Carrying a big balance on your credit cards. While having a lot of debt is never a good idea, using more than 30% of the available credit on your credit cards hurts your credit score.

* For example, if your credit limit is $10,000, your score drops if your balance is over $3,000. This is commonly referred to as the “utilization ratio.” Keep yours under 30%.

2. Paying late is a huge factor in your credit score. Experts estimate that 35% of your credit score is determined by your payment history. Any late payments will lower your score.

3. Closing credit cards is a credit score killer. This is related to your utilization ratio. By closing a credit card, you lower the amount of credit that’s available to you. Your credit score is also sensitive to the length of your credit history.

4. Defaulting is an obvious credit score mistake. When you fail to pay back a loan you owe to a lender, you can lose as much as 100 points from your credit score. Make every effort to pay back your loans.

* If you’re struggling, contact the lender and attempt to make other arrangements. They can be very flexible if failing to do so means not getting their payments.

5. Applying for too much credit. Everyone needs to have some credit, but applying for too much has a negative effect on your score.

* Each time you apply for more credit, your potential lender makes an inquiry of your credit history.

* Each of those inquiries lowers your credit score.

* Avoid sending in every credit card offer that shows up in your mailbox.

6. Not having a credit card at all. Many people are getting rid of their credit cards in an effort to avoid debt. Unfortunately, this does nothing to help your credit score.

* Experts believe that the ideal credit score includes 2-3 credit cards. Credit diversity can account for as much as 10% of your credit score.

* Credit cards help to keep your credit history current.

7. Co-signing for someone else can be a mistake. Putting your credit on the line by co-signing for someone else is a huge risk. Their failure to stay current with the payments can destroy your credit score.

* You’re equally responsible for that debt, so any late payments or defaults will show up on your own credit report.

* You can even be subject to collections and lawsuits. If a lender won’t do business with them, you might want to reconsider before co-signing.

By simply avoiding these common mistakes, you can’t help but have a great score that will guarantee you the lowest interest rates, even if your credit score is poor now. It may take time to boost your credit score, but it’s definitely possible.

Give your credit score the amount of attention it deserves. It makes life a lot easier!

Annual Credit Report: Small Changes Make Big Improvements in Your Credit

Your annual credit report paints a picture of your financial history by detailing your experience with credit cards, loans, and other financial vehicles.

Your credit score is a number that comes from the information in your credit report. Three different credit scores are available through Experian, Equifax, and Trans Union. Combined, they make up your FICO credit score.

What Does Credit Score All Mean?

Your credit score will come into play when you try to buy a car or a home, take out a loan, apply for a credit card, or apply for some jobs. Credit also plays a role in determining eligibility for renting a home or apartment. Your credit score must be “up to par” in order for you to get by in life.

If your credit score is lower than required by a lender, bank, apartment complex or employer, you may miss out on important opportunities. Luckily, there are ways to repair your credit in big ways with simple steps.

Strategies to improve your credit score

1. Obtain your credit reports. You’re entitled to a free copy of each credit report once per year. You can obtain them through each of the credit bureaus individually or through their official website, annualcreditreport.com. Your credit reports offer a lengthy explanation of what is impacting your credit score so that you can make the necessary changes.

* Your credit report will give you the information you need on each account you owe on, including who you owe, how much you owe, and a snapshot of your payment history. Past credit accounts may also be included.

2. Obtain your credit scores. Your credit scores are numerical values placed on your credit history and can range between 350 and 850. Each credit bureau can have a unique score, but they’re combined to create a single FICO credit score. Obtain your credit score at least every six months to keep track of how it changes over time.

* Obtaining your credit scores typically costs money, but can be done through each credit bureau individually.

3. Create a plan. Once you know what you’re up against, create a plan to help you deal with each record on your credit report. Address each record individually and develop a plan for repayment or dispute depending on the legitimacy of the debt. 

4. Dispute incorrect information. If there are incorrect records in your credit report, dispute them. Dispute each one individually through the credit bureau or contact the creditor for more information on the debt. If the information really is wrong, the credit bureau will make the necessary changes or removals. 

5. Pay off your debts. Pay each debt off one by one. You may wish to quickly eliminate your smallest debts first and then focus on the larger ones. Contact each creditor individually to come up with a plan for repayment.

6. Follow up. Continue to check on your credit scores and reports, and follow up with creditors to keep track of your progress.

7. Pay your bills on time. This is one of the most significant ways you can improve your credit. Plus, you can start building good credit right away by paying this month’s bills on time. Make a plan and budget appropriately so you have the funds in order to pay them before the due date.

Take small steps toward improving your credit for a big impact. The longer you have a positive credit experience, the higher your score will go. Work on repaying your debts over time and you’ll see your credit score rise along with your progress.