So much focus of our focus in life and advice from this blog is to reduce expenses in order to save money to enjoy in your golden years, but in order to pay the least amount of interest rates to put a little extra money back in your pocket you need to have great credit. Unfortunately having great credit is not something that happens overnight. If you have poor credit and are looking for a quick fix, it will not happen. Scores increase and decrease over a matter of months and years, so try and avoid a few ways that your credit score could be going down.
Not Checking Credit Report
You may think you have great credit and are doing everything wrong, until you go to apply for that new home mortgage or auto loan and find that you are given less than favorable terms with a high interest rates. You should at least check your report once a year, as the major credit bureaus will offer a free copy of your report every year that you can review for inaccuracies. It will not have your score, however, but with most online credit card accounts you can see your score.
It should go without saying that late payments are a huge hit to your credit report, so bills should at least be paid on, or before the due date. Mortgages and car lease payments may have a grace period of a week or two without a late charge, but not for credit cards. Now these late payments will not hit your report until they are 30 days late and can take up to seven years to come off, so if you are paying late and getting hit with a late payment or interest payment strike, do not go past 30 days.
Maxing Out Available Credit
A large part of your credit score is the percent of debt to available credit, so the larger that window is, the less of a hit to your credit it will be. Be careful if you are using your credit card for every purchase and coming close to the credit limit, and although you may be paying off the balance every month, depending when the credit bureau pulls the report you could be hit. If you do not plan on applying for new debt though, it can still be smart to use your card, as the rewards benefits can be outstanding.
If you are one that carried a balance for a while and worked hard on paying down and finally paying off the balance, the first instinct that you might have would be to close the account so you do not use it any longer and risk running up again. Actually, closing the account will hurt you, as it decreases the amount of available credit that you have, so if you do not want to use the account any longer, keep it open and cut up the card.
Too Many Applications
Credit inquiries are a lower percentage that make up your credit score, but every little bit counts when it comes to make or break being “excellent” credit and getting the best interest rates on the market. Applying for too many applications that require the lender pulling your credit will lower your score and can take up to two years to come off, so make sure if you are getting credit pulled, it is something you plan on completing.
Not Using Cards
Credit cards used to get a bad rap when they were used, giving the implication that you did not have the money to make the purchase so you are putting on a credit card to pay later. While that may be true for large purchases, using credit cards can actually be a wise financial move, especially when it comes to rewards, but charging on a credit card can actually help build up your credit. Continuing to charge and pay off the full statement balance will show the lender that you are a responsible borrower by increasing your credit limit, but also give a perfect credit history on your report.
By far the worst impact to your credit report is if you let a home go into foreclosure, filing for bankruptcy, or letting go of bills for too long that they are filed as a judgment on your credit report, from monthly utilities to income taxes. If you find yourself in this trouble, it is always important to consult with an attorney.