In part 1 of this series, we reviewed the basics of credit scores, In part 2, we went over the “do’s” of increasing a credit score: what consumers should do if they want to increase their score! In this final section, we’ll go over the “don’ts” of increasing a credit score..that is, what you definitely should NOT do if you want to keep your credit score healthy.
- DON’T randomly apply for lots of credit cards as a habit, or apply for new lines of credit before applying for a loan
People sometimes get the idea that they should open new credit cards right before applying for a loan in order to give the impression that they already have many established lines of credit and/or to increase their overall available credit. Creditors can see the dates you got these cards, though, and all those recent acquisitions may actually make them very nervous.
Similarly, applying for store credit cards willy-nilly simply to get discounts or savings is never a good plan.
- DON’T shuffle debt around and think it will help
People sometimes pay off one card and move the debt to another in the hopes that having a “clean” card will impress creditors. It doesn’t work that way—it’s much better to actually reduce the debt. However, it may be convenient to consolidate balances into a card with a lower rate. This is okay.
- DON’T close unused cards
Unused cards aren’t going to count against you. In fact, they help you–they’re part of your established credit history (see “hold onto accounts” above). What’s more, closing cards makes the amount of credit “available” to you decrease, which doesn’t look good. If having an unused card around is a temptation, stash it in a drawer somewhere or ask someone else to put it away.
- DON’T max out your cards
Yikes! This is a risky habit. For the sake of your own sanity, as well as your credit report’s good health, stay well under your credit limits. You really shouldn’t go anywhere close to it.
Many people think it somehow impresses creditors more if you carry a small balance on your credit cards (while still paying the bill on time). This common myth just puts money in the credit card companies’ pockets. Don’t bother.
It may sometimes feel a bit frustrating, unfair, or arbitrary to have so many important financial and life consequences tied to this 3-digit number, which in its turn may be tied to decisions made years in the past. However, with time, patience, and attention to detail, even rock-bottom credit scores can be turned around. For more on credit scores, refer to the references below.
MyFICO. (n.d.) How to repair my credit and improve my FICO Scores. Retrieved from http://www.myfico.com/credit-education/improve-your-credit-score/
Dratch, D. (n.d.) 7 ways to improve your credit score. Retrieved from http://www.bankrate.com/finance/debt/7-simple-ways-improve-credit-score-1.aspx
Warnick, M. (n.d.) Uncle Sam wants you…unless your credit stinks. Retrieved from http://www.creditcards.com/credit-card-news/military-recruiting-credit-checks-1270.php
Experian. (n.d.) What is a good credit score? Retrieved from http://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/
USA.gov. (2014). Credit reports and scores. Retrieved from https://www.usa.gov/credit-reports