What Don’t You Know About Credit Scores?
Worry About What Counts Against You
You know that paying your credit card bills late counts against your credit score; so you always pay your bills on time…right? You also know that missing any of your payments is a strike against your credit score so you never miss a payment…right?
If you do not follow both of those habits, you should, those are the easy financial habits to track. There are other financial moves that you make which count against you that are less obvious.
It’s The Little Things That Makes Your Score Undesirable
With credit scores it all adds up. Even though little dings can lower your credit score by a tiny bit, when you add those tiny bits together, your credit score becomes undesirable.
Too Many Credit Cards
Having too many credit cards could lower your score because creditors view it as being overextended. If you were to max out all of your credit cards, creditors ask themselves if you would be able to afford to pay the bills or would you fall into the late and missed payments category.
Creditors take your payment history very seriously and you should also; one-third of your credit score is determine by your payment history. Some payment issues can effect your credit score for 7 years.
To help keep a high credit score, limit your credit cards to a few.
Too Large Equal Red Flag
If you carry large credit card balances you set off fireworks to creditors. You risk getting close to your credit limits. You risk late and missed payments. You also waste money on fees and interest rates.
Your credit utilization ratio makes up another one-third of your credit score. This ratio is the amount of credit you have used compared to the amount of credit you have available to you.
Avoid Collection Agencies
Anything that ends up at a collection agency can damage your credit score for 7 years; that’s a long time in your financial life. Everything you buy during that 7 year period cannot be financed through credit cards; plus you will be overpaying for everything because your credit score will be so low. It’s not worth it.
Be very diligent about not letting any of your bills go to a collection agency. That includes unpaid bills such as medical bills, your rent, your mortgage and even your unpaid parking tickets. Pay your bills on time, even if you only pay the minimum amount due…make some type of payment…avoid collections.