Having a good credit score is necessary when you want to take out loans, mortgages and other financing options. Unfortunately, many people are unaware of some things they do every day that could keep their credit score from being as high as it should be. Below are some top things that may work against your score.
1. Closing old Credit Card accounts
It may seem like a good idea to close out any old credit card accounts you are no longer using. While it feels like the right thing to do, it can affect your score. Depending on how old the credit card account is, it may shorten how long your credit history is. If you want to get rid of extra credit cards, get rid of the newer ones while hanging on to the old ones. A long credit history benefits you and your credit score.
2. Reconsider financing store purchases
You may find yourself in the market for a new bedroom set or entertainment center for your living room. If the business you are shopping with offers in-store financing of your purchase, reconsider that option before you make the purchase. Often, this type of financing looks like a “last resort” loan by banks. This could be a red flag regarding your credit score because it makes you look like a high credit risk. The small credit line on most store credit cards means that one purchase may use up most of it. This will increase your credit utilization and lower your score.
3. Fighting Credit Card bills
If you are currently fighting with one of your credit card companies, another lender may choose to ingnore the issue while calculating your creditworthiness until the conflict gets resolved. There is also a chance it may get included. Unfortunately, that may lower your score if your bill is over 30 days late.
4. Asking for limit increase
Having a higher credit limit will mean you use less of it each month. This can lead to an increased score, but your credit score can take a hit when you initially request it. This may be a temporary ding to your score, so keep in mind if you will need to take out any loans in the near future before doing so. The credit score increase from a better utilization rate could balance out the temporary decrease from the inquiry. Be sure your application has a good chance of being accepted for a higher limit before applying.
5. Signing up for a new phone contract
Another sneaky thing that may lower your credit score is signing up for a new phone contract. Typically, phone providers launch a hard inquiry to see if you are trustworthy enough financially to be given a contract. Each inquiry, especially hard inquiries, can negatively affect your credit score for at least two years. This is a long time to take a hit on your credit report for a phone plan. Each time a lender checks your score, hard inquiries may follow and make it harder for you to get approved.
