A high credit score can get you anywhere, from low-interest loans or mortgages to premium insurances and fantastic job opportunities. Here are some tips to help you keep your credit score high and avoid damaging it.
- Paying late.
- Not reviewing your credit report.
- Maxing out your credit cards
- Submitting too many credit applications
- Being a Co-Signer
Yes, one single payment can hurt your score. It will be like taking a plunge on a slide, rushing down to the bottom. Alexandria White of CNBC stated, “Late or missed payments can seriously hurt your credit score if you’re more than 30 days past due. You can expect a drop of 17 to 83 points for a 30-day missed payment and a 27 to 133 decrease for a 90-day missed payment, according to FICO data.
However, if your payment is less than 30 days late, you won’t see a drop in your credit score since a payment has to be a full 30 days past due before it’s reported to the credit bureaus (Experian, Equifax, and TransUnion). But you may incur a late fee or penalty interest rate — which raises your APR”
On the other hand, Deb Hipp of Debt.com says, “Another major factor in your credit score calculation is payment history, which accounts for around 35% of your credit score. To improve your credit score, build a positive payment history by making all credit card and loan payments on time.
But what about those old accounts that have been dogging you for the last five years? The good news is that negative payment history on a credit account automatically drops off your credit report after seven years, so the passage of time – in conjunction with making timely payments on current accounts – can raise your credit score significantly.” she added.
You need to know what are the factors on your credit report that are pulling down your score. Look for errors and report them right away. You can get one free copy of your credit report once a year from the three major credit bureaus Experian, TransUnion, and Equifax.
You can actually get it weekly during this pandemic, but only up to April 2021.
Nick Clements of Forbes.com advised, “Identity and account theft are increasingly common. The only way to ensure you are not a victim is to review your credit report regularly. You are entitled to one free credit report every year, which you can download from AnnualCreditReport.com. It is important to check your report with all three credit bureaus because inaccurate information can often appear on only one of the reports.”
This is a prevalent mistake that most people commit. When you max out your credit cards, you are high-risk to lenders because your utilization ratio is high. For example, if your credit limit is $30,000, and you charge $39,000, that is already 95 percent of your available credit! Overutilization is risky when the debt-to-credit ratio is very high.
Nick Clements of Forbes.com says, “As a general rule, the lower the utilization, the better. If you are still using a credit card from your first job after college, you might want to call the credit card issuer and ask for a credit limit increase to reflect your new salary. Alternatively, you could apply for a new credit card to create additional limit that you would not use. You would have a short-term reduction in your score from the credit inquiry, but over time you would be better off so long as you do not build up debt on your new card.”
Applying for a new credit card every week is not showing creditworthiness. And this can lower your credit score as you will have too many “hard inquiries” from creditors in a very short time. Do not be tempted by the store sales and apply for credit you do not need.
Casey Bond of Creditcards USNews says, “Having too many credit cards is an easy way to overspend and fall into a cycle of debt. Even if you’re a frugal spender, however, applying for and opening too many cards is a red flag to lenders. Multiple hard inquiries on your credit report and a string of fresh credit accounts can look like you’re desperate to cover your bills.”
Cosigning for a loan can be the death penalty to your credit when that person you co-signed with doesn’t keep up with their end of the deal. When you co-sign, you must check your credit report regular basis. Credit monitoring services keep an eye on you and notify you when a late payment is made.
Nick Clements of Forbes.com says, “When you co-sign, you are responsible for the debt. That means the debt will likely appear on your credit report, and it will look like you owe the money (because you do). Your total debt will look higher. And, if payments are missed, your credit score will be harmed. Be very careful before co-signing for anyone. Banks generally ask for a co-signer because the individual cannot qualify for the credit on their own. You will likely be taking a big risk if you do sign on the dotted line.”