Wondering why your credit rating isn’t as high as you expected? Check out if either one of these ten things or habits may be pulling down your credit score:
1. Closing old credit card accounts. Okay, so you’ve found a new credit card with a much better deal. However, don’t close out your old credit cards especially if it has been with you for a long time. Doing so is like erasing the oldest part of your credit history. Instead, keep your old credit cards and use them only for very small purchases that you can pay off right away.
2. Frequent refinancing. Refinancing your home loan can be a smart strategy especially if your first loan has high interest and fees. However, frequently refinancing your home loans is a different thing as this habit can send out a negative impression to potential creditors.
3. Too many department store cards. Owning one or two department store credit cards may be okay, but try not to sign up for each and every shop in your area. Not only would this make you a “high risk borrower”, it can also pull down your credit score.
4. Using up 50% or more of your credit limit. Ideally, you should stick within 30% of your allowable credit. Anything near 50% or more would hurt your credit score. Be careful about maximizing your credit card’s limit just because it has a low rate of interest.
5. Sending out multiple credit applications. When applying for a loan or a new credit card, do your research first and submit your application only when you’ve found the right one. Don’t sign up for credit cards just to get the free shirt, cap or coffee mug. Too many inquiries in your credit report can lower your score.
6. Fines and penalties. If you think that a parking ticket or a public library fine is harmless, you’re wrong. Some local governments turn over the collection of fines to debt collection agencies, who in turn can mess up your credit score, if you won’t pay.
7. Not using your full name in your accounts. Regardless of the type of account you’re applying for (credit card, car loan, mortgage, etc.), make sure that you sign up using your full legal name. This way, you can be more assured that the credit information in your credit report would be yours, not someone else’s.
8. Late payments. Remember that your payment history comprises 35% of your total score. Even a single late payment can send your credit score plummeting. Thus, it is recommended to submit at least the minimum payment in advance to avoid a record of late payment.
9. Unauthorized transactions. When was the last time you checked your bill or your credit report? You may be surprised to find unauthorized charges in your account that are already past due. You may not even be aware of them until your creditors start calling your attention on these unpaid bills!
10. Old negative remarks. If your credit report contains negative remarks, your credit score could suffer. For instance, if it contains “charge-offs” that you have already paid, request that these remarks be erased from your report.