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In the world of personal finances, a credit score can be essential to good money health. But these magic three-digit numbers kicked out by the scoring agencies are usually different for the same individual, who has just a single set of borrowing data. The agencies apply their own formulas to your numbers. You can keep your score on the upside by avoiding a few bad habits.
5 Lack of Attention
Many people don’t trouble themselves with attention to their own credit report. But with credit scores, ignorance isn’t bliss—it’s important to keep up on this information. Pull your own credit report; a federal law requires the credit bureaus to provide it for free at least once a year. Study the entries on the report, and contact the agency to correct any errors. A good, hard look at your credit history may change your borrowing habits for the better.
4 The Cancellation Contradiction
If it’s good to reduce the number of accounts, it would also seem wise to just cancel them all, but no. Taking a scissors to your entire plastic collection will hurt your ratio of debt to available credit, which makes up around a third of your credit score. Cards are good as an emergency backup; if you need money right now and don’t have any credit, you’ll have to get the money from somewhere that might create a bigger financial burden than you need.
3 Too Many Cards
Who can resist that friendly credit card application that just arrived in the mail? The lender makes it as easy as possible, requiring only your address, phone number and your estimate of how much you earn every year. The result is yet another card, and another bill due date that’s easy to miss. If you have a lot of accounts going, then your credit score will get hurt. Carry one or two at the most; this makes it easier to keep up on payments and avoid the temptation to use your cards too often.
2 Minimum Payment Mistakes
You may be paying all your bills on time, and that’s fine, but if you’re just paying the minimum to keep everything current, you’re risking a visit to revolving-credit hell. In this place, the high interest keeps piling up, you pay interest on the interest, and the high cost of holding that little plastic rectangle damages your finances. Credit experts advise charging only what you can afford to pay off every month, and not letting those balances rise.
1 Other People on Your Card
It’s a good idea to keep your credit card to yourself. Allowing a friend or relative to use the card, no matter how trustworthy he may be, tends to run up your balance and pile on more interest. This lowers your available credit; this number is an important part of all credit score formulas, and when it’s heading down your score usually follows. Keep your available credit high. Don’t lend out your card and use it only when you have to.
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