Manage the credit you don’t use.
It is easy to apply for a store credit card today and then forget all about in three years. However, that account will remain on your credit report and affect your credit score as long as it is open. Having credit lines and credit cards you don’t need makes companies view you as a bigger credit risk because you run the risk of “overextending” your credit.
Having lots of accounts you don’t use also increases the odds that you will forget about an old account and stop making payments on it, resulting in a lowered credit score. Only keep open accounts that you currently use and make sure that all other accounts are closed. Having fewer accounts will make it easier for you to keep track of your debts and will increase the chances of you making all payments on time while maintaining a good credit score. However, you must realize that when you close an account, the record of the closed account remains on your credit report and that can also affect your credit score for a while. In fact, closing unused credit accounts may actually cause your credit score to drop in the short term, as you will have higher credit balances spread out over a smaller overall credit account base.
For example, if your unused accounts amounted to $2,000 and you owe $1,000 on accounts that you have now (let’s say on two credit cards that total $2,000), you have gone from using one fourth of your available credit ($1,000 owed on a possible $4,000 you could have borrowed) to using one half of your credit (you owe $1,000 from a possible $2,000). This will actually cause your credit risk rating to drop. In the long term, not having the extra temptation to charge and resisting credit that you don’t need can work for you.
Limit inquiries on your credit report.
Every time someone looks at your credit report, an inquiry is noted. If you have many inquiries on your report, it may appear that you are shopping for several loans at once or that you have been rejected by lenders. Both can make you appear to be a poor credit risk and may affect your credit score. This means that you should be careful about who you allow to access your credit report and when. If you are shopping for a loan, do so within a short period of time because inquiries made within a few days of each other will generally be lumped together and counted as one inquiry. You can also cut down on the number of inquiries on your account by approaching lenders you have already researched and may be interested in doing business with. By researching first and approaching second you will likely have only a few lenders accessing your credit report at the same time, which can help save your credit score.
The credit physician says to look at your credit report every month. The most common error people make with their finances is not checking their report for mistakes and new items, such as collections and charge offs. These items will affect your score in a very negative way, and can drop your credit score quickly while setting you back for months or even years. Therefore, keep an eye on your credit report!
Online loan rate comparisons have a bigger impact than you may think.
Online loan rate quotes are easy to get – type in some personal information and you can get a quote on your car loan, personal loan, student loan, or mortgage in seconds. This is free and convenient, leading many people to compare several companies at once in order to make sure that they get the best deal possible. The problem is that since online quotes are a fairly recent phenomenon, credit bureaus count each such quote estimate as an “inquiry.” This means that if you compare too many companies online by asking for quotes, your credit score will fall due to a higher number of inquiries. This does not mean that you shouldn’t seek online quotes for loans. In fact, online loan quotes are a great resource that can help you get the very best rates on your next loan. What this information does mean, however, is that you should research companies and narrow down possible lenders to just a few before requesting quotes and allowing them to make inquiries. This will help ensure that the number of inquires on your credit report is small, and your credit rating will remain in good shape.
Thinking that you only have one credit score.
Most people speak of having a credit score when in fact most people have at least three or more scores, and these scores can vary widely. There are three major credit bureaus in the country that develop credit reports and calculate credit scores. There are also a number of smaller credit bureau companies.
Plus, some larger lenders calculate their own credit risk scores based on information in your credit report. When repairing your credit score, then, you should not focus on one number – at the very least, you need to contact the three major credit bureaus and work on repairing the three credit scores separately.
Written by: Michael Malloy ( The Credit Physician ) This author has been researching the anatomy of the credit report for years, giving readers the information to empower them to take control of there credit reports.
www.creditphysician.net [email protected]