Don't mess up your credit with easy mistakes
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Your credit score is important for so many things in life. A high credit score helps you purchase a home and auto at a reasonable interest rate. Your auto and home insurance will also be cheaper when you have a higher credit score. When you move, if you have a good FICO score, you shouldn’t have to put down a big security deposit. It’s also easier to rent property and get the job or promotion you want if you work in a field where credit checks are required. But you might make unintentional mistakes that can lower your score, and you don’t even know what you’re doing wrong. Here are some examples.
#1 Failing to Check Your Credit Report
Your credit report is a living repository of all your credit and debt activity. The information is constantly changing and updating and your score changes often as well. If you don’t keep an eye on this important archive of your credit history, you might miss errors, identity theft, and other negative items.
Mistakes on your credit report, as well as fraud, can cause major damage to your score. If you don’t catch it early, this can cause a total credit score meltdown. It might be hard to remember to check your score, so enroll in a monitoring program that alerts you to changes in your report.
#2 Closing Accounts You Don’t Use
If you have a credit card you don’t use often, or an older secured card that you don’t need anymore because you have plenty of unsecured cards, you might want to clean out your wallet and close these accounts. But, in some cases, this could cause your credit score to plummet. Why?
Your average age of credit benefits from older accounts. Closing them might drop this part of your score. Unused credit lines help your utilization. If you don’t carry balances, that’s not such a big deal, but if you do, closing accounts could spike your utilization even though the dollar amount is unchanged.
#3 Not Paying Parking Tickets or Utility Bills
Parking tickets and speeding tickets left unpaid can result in collections items placed on your credit report which can drop your score. If reported to the credit bureaus, they can remain for three to seven years dragging down your score. If you get a ticket, always be sure to pay it promptly.
Utility bills don’t help your credit score if you pay them on time. However, if you fail to pay your water, electric or gas bill, the provider might turn your account over for collections. Just like with the parking tickets in collections, this can drag down your score for years and years to come.
#4 Not Paying Your Income Taxes or Returning Library Books
Unpaid federal taxes can result in tax liens that show up on your credit report and drop your score. Federal tax liens stay on your credit report for 15 years. Even if you pay the lien, it will remain on your credit report for seven years. Avoiding liens and judgments will protect your score.
Not returning your library books doesn’t seem like a big deal, but some library systems are aggressive. They will turn over accounts to collection agencies for late fees and any unreturned materials. Any collection account reported to the credit bureaus has the potential to wreck your FICO score.
#5 Over-Utilizing Your Lines of Credit
One of the primary factors in your credit score is utilization. One rule of thumb you might hear is to never go over 30% usage of your credit lines but that number isn’t hard and fast. The utilization percentage that will negatively impact your FICO score varies based on many conditions.
Those with higher scores will usually not be hit as hard by carrying close to 30% but those with lower scores may be better served by sticking closer to 10%. Once you go past 50%, your score will take a beating and if you max your credit lines, your score will keep dropping until it’s under control.
The Benefits of Good Credit
While a good credit score can bring many benefits to your life including lower expenses and greater access to jobs and housing, lower credit does the opposite. You can lose out on career opportunities, pay subprime rates for loans, pay sizable security deposits for services, and be constantly turned down for lines of credit, and renting a home or apartment. You can even be barred from military service if you have deplorable credit.
If you have just gone through bankruptcy to shed your debt, you’re in a perfect position to rebuild your credit score and get on a better financial track for your future. To find out more about improving your credit score after bankruptcy, contact Credit Score Keys today. Call 919-495-2365 for a free consultation.
