What Helps Your Credit Score and What Harms It?

Do you know what’s good for your credit?
Do you know what’s good for your credit?
Image Source: Flickr User: Doug Hay

 

A recent study by Capital One called the “Credit Confidence Study” surveyed more than 2,300 people establishing or rebuilding their credit. Unfortunately, not everyone understands what impacts their credit score and which habits can help or hurt their credit. Here is a look at the study findings and a roster of activities that can help or harm your score so you can choose wisely.

 

Capital One Survey Results

Of those surveyed, 86% want to build their credit score and 82% are willing to do what it takes to meet that goal. Most interesting is that 90% of respondents in the age bracket of 18 to 24 would give up their access to social media if it meant they could have excellent credit. Roughly 70% believe good credit is the key to the “American Dream.”

 


#1 Opening New Accounts Can Help Your Credit Score, but Closing Old Ones Can Hurt It

 

One of the components of your credit score is average age of credit. This is calculated by examining the opening date of all your credit accounts and averaging them. The older the average age is, the more your credit score will benefit. That’s why you should not close older credit card accounts.

 

If they have a higher rate of interest, use them rarely, and don’t carry a balance. If they have a high annual fee, try and negotiate it down with the card issuer. If you have other accounts that old, closing one might not hurt. But, overall, older accounts in good standing are beneficial to your score.

 

Opening new accounts every now and then is also good for your score. However, opening too many can harm your score and lower your average age of credit. When you apply for credit, a hard inquiry goes onto your credit report and makes it dip slightly. Too many and your score can take a hit.

 

#2 Using Your Credit Cards Can Help Your Credit Score, but Carrying Balances Can Hurt It

 

If you get credit cards then don’t use them, the card issuer may close your account. Closed accounts lower your available lines of credit, which can hurt your credit score. Also, if you don’t use your credit cards, you won’t get credit lines increases, which can boost your credit score.

 

On the flip side, if you do use your credit cards but carry too large of a balance, you can harm your credit. Some credit forums advise carrying no more than 30% of your available credit but this may be too high. What’s wise is to use then pay off in full each month for best results.

 

Even worse, if you max out your credit cards, you can pay overlimit fees, lots of interest, and this will throw off your utilization, further lowering your credit score. If you do have to use your cards and can’t pay them off within the month, spreading among a few cards so you don’t max may be better.

 

#3 Checking Your Credit Report Will Not Hurt Your Score, but Failing to Check It Can Hurt It

 

Some people think that checking your credit report is the same thing as when a creditor pulls your credit and can lower your score. This is not true. You can check your credit report as often as you like with no negative consequences. In fact, not checking your report may do more harm.

 

It can be a hassle to remember to check your credit reports regularly, so a better way may be to sign up for a low-cost monitoring service. A service will monitor your reports and update you when there are changes such as a new account added or a bump to your score.

 

The monitoring program will also alert you if your credit score drops, there’s a negative entry, or any changes so you’ll know if someone has used your credit for fraud or you’ve been the victim of identity theft. It can also alert you to past-due accounts that may impact your score.

 

Building up and maintaining a good credit score is a matter of effort, not luck. You can’t just leave your credit alone and hope for the best. If you filed bankruptcy recently, it’s time to get your credit score back on track.

 

Contact Credit Score Keys today for a free consultation about improving your credit after bankruptcy. Call (844) 659-3226 today.

 

 

 

Resources:

Capital One Study

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