Warning: These Things May Lower Your Credit Score

Before you apply for a loan, you should obtain a copy of your credit report. Your credit report shows how each of the three major credit bureaus rate your credit. Since each bureau has its own method of analyzing your financial history, it’s important to look at all three scores.

Ultimately, these ratings may play a role in whether or not you qualify for a loan, as well as what your interest rate will be.

Your payment history typically accounts for 35 percent of your credit score.The amount of money you owe typically accounts for another 30 percent. The length of your credit history accounts for 15 percent, and new credit as well as your credit mix typically account for 10 percent each. However, the scores from the different bureaus may vary because each bureau may collect different information, as well as use a different formula to calculate the score.

Closing Accounts

Many people are surprised to discover that closing a credit account may actually have a negative impact on their credit score. When an account is closed, it may shorten your credit history or change your overall credit mix. If the ratio of used credit to available credit increases, this could also have a negative impact on your score.

Having Too Many Cards

Applying for a lot of different credit cards may also be detrimental to your score. Each application results in a credit check, and too many credit checks may be considered a risk.

Since the amount of available credit being utilized is one factor that goes into your credit score, store credit cards pose a particular threat. They tend to have low credit limits, making it more likely that you’ll use a higher percentage of your available credit, lowering your score.

Be careful how many cards you use, and make sure you’re responsible with the amount of debt you consume. Having one or two credit cards, along with a student loan and a personal loan, is much more positive for your credit score.

It’s important to note that if you put a fraud alert or freeze on your credit report, there won’t be any impact to your score.

Stay Informed

If you don’t know where you stand financially, it’s a good rule of thumb to obtain a copy of your credit report at least once per year. Most credit reporting bureaus offer one free credit report per year, so it’s important to take advantage of that. This report provides you with information that could allow you to take action and fix any errors that are found in your credit.

When was the last time you checked your credit score?


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