5 Moves That Affect Your Credit Score

What Lowers Your Credit Score?

First Published Date: October 27, 2011 ADawnJournal.com

Credit scores are very important if you are applying for a mortgage, a loan, credit card, and so on. A lower credit score will make your interest and payments higher, thus costing you more money. There are certain things you can do to avoid factors that lower your credit score. Let’s discuss them.

Making Late Payments or Missing Payments – This factor affects your credit score the most because 35 percent of your score is based on payment history. Paying on time can make the difference between an average and an excellent credit score.

Borrowing Too Much – This is the second biggest factor that lowers your credit score. Your outstanding debt counts for 30 percent of your credit score. If you have a high ratio of credit used in relation to your available limits (credit utilization ratio), it will lower your credit score. Don’t borrow up to your limits. Keep it 25 percent or less of your available limits.

Closing Too Old Credit Card Accounts – The length of your credit history counts for 15 percent of your credit score. To keep your credit score higher, do not close accounts that are too old. It is a good idea to keep a variety of credit card accounts active, especially those which are old.

Applying Frequently – If you apply too often for credit cards or other loan accounts, it will lower your credit score. Applying too many times for credit implies that you are desperate for credit and it affects your credit score. This accounts for 10 percent of your credit score.

Not Keeping A Variety of Credit Accounts – Your credit score will be higher if you have a variety of credit accounts. Having only one type of credit account will lower your score, as keeping a variety of credit accounts for 10 percent of your credit score. Keep multiple types of credit accounts active, even if you don’t use them. For example, an investment loan account, mortgage, store credit card account, regular credit card account, and so on. Sometimes a credit issuer will close your accounts if you don’t use it for a while. To keep them active, keep a very small balance and pay the minimum every month. Or, you can charge a very small amount once in a while and pay off the balance