1.
Your Score Will Increase if You Close Accounts
- One cause of lower scores is having too many unnecessary accounts. While it’s
logical to assume that simply closing these accounts will raise your score, that’s
not the case.
- Closing older accounts will make your credit history look younger, which can
hurt your score.
- Additionally, closing accounts reduces the total credit available, which also
hurts your score.
- This doesn’t mean you should never close an account. If you’re
being charged an annual fee, for instance, closing the account won’t hurt
much - especially if your score is already relatively high.
2. Getting Your Credit Card Company to Lower Your Limits
Will Boost Your Score
- Narrowing the gap between your available credit and your debt can have a negative
effect on your score. It doesn’t matter if you asked for the reduction.
The best way to increase your score is to simply pay down your debt.
3. Checking Your Credit Rating Can Hurt Your Score
- Credit
bureaus understand the need to frequently check your credit information to
guard against errors and identity theft.
4. Shopping for the Best Rate Can Hurt Your Score
- Credit bureaus understand that many consumers want to make sure they’re
getting the best rate, so they usually give you a two-to-four week window prior
to a major purchase to make rate inquiries.
- In order to avoid dragging the process out, however, it’s a good idea
to do some research prior to making inquiries.
5. You Can Get a Good Credit Score Without Using Credit
- Some
people think that living on a cash-only basis will impress prospective
creditors, but it’s not true. Only by establishing a reliable credit
history will creditors feel comfortable lending you money.
6. Paying Interest is Necessary to Get a Good Credit Score
- Credit
bureaus make no distinction between balances that are carried
month-to-month, and those promptly paid off. To get the highest credit
rating it’s true you need to have installment as well as revolving
accounts, but it’s not necessary to have the highest scores to get the
best rates and terms.
7. If You Have a Dispute with Your Lender, Adding a
Statement to Your File Can Help Your Score
- While federal law does give you the right to attach such statements, they
have no weight in the scoring.
- If the dispute is costly enough, it’s probably best to pay the bill
under protest then sue the vendor in small claims court.
- Fortunately, most disputes can be settled well short of such actions. Use
your credit card company’s dispute resolution process, or work persistently
with the vendor’s customer service department.
8. Your Score Will be Hurt if a Closed Account Doesn’t
Read “Closed By Consumer”
- Fair Isaac knows that if your account was closed due to default that will
be otherwise documented.
- Since most lenders only look at your score, they don’t care who closed
an account.
9.
Credit Counseling is Worse than Bankruptcy
- Bankruptcy is the worst thing that can happen to your credit rating.
- The current FICO formula ignores any reference to credit counseling.
- Some lenders, however, will report you as late just for enrolling in a debt
management plan, figuring that if you’re not paying what you originally
owed you should somehow be punished.
10. You Can't Obtain Credit After Bankruptcy
- Even though bankruptcy deals a devastating blow to your rating, it’s
possible to recover from it. Before your case has even closed, you’ll probably
receive some credit card offers. And six months after the bankruptcy, some lenders
will even offer mortgages.
- Other lenders, however, might never offer you credit again. You may have to
seek out “subprime” lenders for credit, but beware – some of
these charge unreasonable rates and fees.
This article is provided for
information use only. It does not take the place of an attorney, a tax advisor,
or an accountant. Always seek out the advice of a licensed professional before
undertaking any significant change in your financial situation.