Most common credit score mistakes
Even when you mean well, at times it could still result in harmful mistakes that may lower your credit score!!!
You use your credit card regularly, pay the bill every month and avoid taking on too much debt. Your credit score must be in great shape, right?
Maybe not. Even the most well-intentioned credit users can end up harming their credit by making simple mistakes. And having good credit is important, even if you don’t plan to borrow money. For instance, about half of Americans don’t know that bad credit can restrict their choices for cellphone service, according to a NerdWallet study.
Here’s a look at the most common credit mistakes that can lower your score.
Building credit is a bit of a Catch-22. You have to use credit to establish a credit history, but you can’t get credit unless you already have a good credit score. Unfortunately, avoiding credit cards and other loans completely means you won’t have any credit history or score. That’s bad news even if you don’t have any plans to borrow money, as your credit score affects many major areas of your life.
Only Sticking to Credit Cards
Although opening and actively using a credit card will help you establish good credit, it’s only one piece of the puzzle.
That’s because 10 percent of your credit score is dependent on having a mix of credit, which shows lenders you’re capable of handling various types of credit.
Whether you finally paid off one of your credit cards or have one you don’t use anymore, it might seem like closing the account is the responsible thing to do. Unfortunately, closing a credit card account is a fast and easy way to lower your credit score.
Asking for a Credit Limit Increase
Keeping your credit utilization low is important for maintaining good credit. If you have a high ratio, increasing your credit limit can instantly improve it. But before you do, think twice.
When you ask for a credit limit increase, the bank will need to re-evaluate your financial situation and decide whether to grant one. Often, this means a request to increase your limit is treated the same as a new application for credit, resulting in a hard pull on your credit reports.
Maxing Out Your Credit Cards
It might not seem fair, but using the full credit line extended to you by a credit card issuer will negatively affect your credit score – even if you pay off the whole balance every month.
That’s because the date your balance is reported and the date your payment is due are often different. For example, say you have a $2,500 credit card limit and spend $1,500 during the month. Your issuer then reports that $1,500 balance to the credit bureau. Even though you plan to pay it all off the following week, you’re stuck with a credit utilization ratio of 60 percent regardless.
Paying your bills on time is the most important thing to do if you want to maintain good credit. Your payment history accounts for 35 percent of your FICO credit score, and even one missed payment can seriously set you back.
But just because you pay off your credit card and make your student loan payment every month doesn’t mean you’re in the clear. Leaving library books on your shelf or stuffing unpaid parking tickets in your glove box could land you in collections.
Be smart with keeping up a good credit score as from today… be watchful of harmful mistakes that could result in lowering your credit score and have a great one!!!