Your credit score, as some view it, is the lifeline that connects you to being able to do anything from borrow money to and overall how you’re viewed by creditors and lenders, accordingly.
But as much as we value our credit score and generally speaking know just how important it is, the majority of us don’t really know how to avoid common mistakes that lower your score and take what once was a pristine three digit number and turn it into more of a negative then a positive.
Ultimately, you want to avoid checking your credit score with a hard inquiry, meaning you’re asking too much and too frequently (close together) for your score to be pulled, such as buying a car and having a handful of dealers pull that score every time you test drive a new vehicle.
This is different then simply checking your credit score on your own. A huge oversight by most of us is not understanding checking your score yourself is different than a hard inquiry. If you aren’t checking your score, you might miss out on anything from an inaccuracy to wondering why the score you saw at 720 dropped to 680, and you don’t remember anything changing much.
Furthermore, the general penchant for closing accounts also should be handled a little differently versus what you believe to be correct. You don’t want to start closing multiple cards at once, as this path will lower your credit score. As much as you believe you are protecting yourself from using those cards, you’d be better off cutting them up and leaving the accounts open then doing a mass overhaul in the form of closing them altogether.
This practice is especially harmful if you have a high debt to debt ceiling ratio, meaning that if you have three credit cards they’re all essentially maxed out. Lenders look at total debt, which means if you only have those three cards left, your debt ceiling is closing in on what you have available to borrow that much faster. Cards with zero balances show better utilization of how you’re spending that money (or not spending it in the case of those cards).
Finally, paying late is always off the table and simply should be avoided at all costs. Paying the minimum is fine, but missing payments is going to lower your score very quickly, especially if you have a propensity to do it frequently.
That score isn’t all you’ll be judged on as far as you being responsible financially but having one that isn’t so good won’t do you any favors, either.
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