What Can Dramatically Affect a Credit Score

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By: Alayna Pehrson – Digital Marketing Strategist for Best Company

Credit scores are often compared to report cards in that they’re the culmination of a variety of smaller weighted scores. Since not all of these smaller scores are created equal, some changes will affect your credit score very little, while others can affect it greatly.

According to a recent report, credit card users between the ages of 30 and 40 tend to have a significantly lower credit score than those who are in their late 50s or older. The score disparity between generations is likely due to a lack of knowledge of those building blocks that make up a credit score—namely, the specific events that either help or hinder your score.

What Can Kill a Credit Score

There are many ways a credit score can be lowered. The fear of debt and financial hardship from credit lingers with the younger generations, which consequently prevents them from using credit cards at all, which in turn could contribute to a lower credit score. Establishing a healthy credit history plays a big role in your credit score. You don’t have to be afraid of credit cards if you can manage the following:

Late Payments

Although this may seem like an obvious answer, many credit card users lack the knowledge of just how much paying bills can affect a score. According to Lifehacker, payment history makes up approximately 35 percent of a total credit score. The amount that late payments can put a dent into a score also depends on how large the payments it and how late it is paid. Basically, the larger is it and the longer is it not paid, the more it will hurt a credit score.

Closing a Credit Account

For those with fair to poor credit scores, closing a credit account can have lasting negative effects on a credit score. Although many people believe that closing credit accounts will help them avoid debt, the act of closing the account will lower the overall score. When an account is closed, the good and the bad history from the account will last for up to 10 years. When you lose positive history all the good credit you accumulated goes with it. However, in the meanwhile, all the bad credit history will continue to plague you for years.

Maxing out Credit Cards

Maxing out a credit card will hurt a credit score because it raises credit utilization and shows lenders that there is less responsibility present, according to U.S News. The more that is charged to the credit card, the more that has to be paid back. With this increase in spending, the likelihood of on-time payment lowers. After all, overspending is what typically leads to debt.

What Can Greatly Increase a Credit Score

There are a few things that can help you increase your credit score by a large margin. The extent to which someone can raise their credit score obviously ranges depending on what the credit score is to begin with; however, it is still important to know what can help a credit score.

Cleaning up the Report

It is fairly easy to obtain a free copy of your credit report. The report shows if there are any late payments or if there is any inaccurate information. Cleaning up the report can make a large positive difference on a score and help raise awareness of how the card is being used as well as if there is any false activity occurring behind your back.

Opening a New Credit Card Account

This option allows credit card users to increase their scores without much stress. Although opening a new account can help you maximize rewards and can increase your overall score, it is important to know that opening multiple accounts in a short amount of time can be hazardous to your score. This can lower your score because it shows hints of financial irresponsibility. At first, opening an account will ding your score, but in the end, opening one to two other accounts can give you major long-term benefits.

Credit Repair Services

There are many credit repair services and options that can greatly increase your credit score.

Most credit repair companies and services are strictly in business to help people raise their credit scores in a relatively short amount of time. This can be incredibly helpful for those who have poor to bad credit scores. Experience is important, so picking a credit repair company that has been in business for a long time is a good way to tell if they will be able to resolve your credit score problems. Choosing a credit repair service that allows for a free consultation is also something that can save time and money when figuring out which company will address your credit score needs the best.

Overall, there are many ways your credit score can be increased and decreased. Knowing what makes up a FICO score is helpful for those looking to avoid credit disaster. The myFico blog provides a helpful resource of a Fico score breakdown that card users can refer to. There are many other useful online resources that can help point you in the right direction for your credit score needs.

Learn how you can start repairing your credit here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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Credit Wise Money Management

credit wise money management

Each year, as we do our duty with the Internal Revenue Service, there’s always a hope that we’ll score a significant refund from our income taxes.

That extra money is always a great gift, but what if you could turn those extra dollars into some long-term savings or credit-building strategies? Here are 5 ways to put your tax refund to use while being wise with your credit.

Give Your Credit Cards a Break

Are you the recipient of an unexpectedly large check from Uncle Sam? Consider using that bonus to attack the balances on your credit cards, rather than racking up more debt. A one-time payment can help significantly reduce both the interest you’ll owe in the long run, as well as cutting down your credit utilization ratio – and that’s a positive factor for your credit report, and your ability to get more credit at a better rate in the future.

Upgrade Your Home

A surprise return from the IRS can also go much further if you use the funds to make some much-needed repairs or upgrades to your home. With housing prices skyrocketing in many regions of the country, even a small investment in your home can mean a positive boost in equity or resale value, so consider that kitchen upgrade or the long-awaited fence or roof repair project you’ve been procrastinating.

Upgrade Yourself

One of the best investments you can make is in your own professional future, so maybe it’s time to consider spending a bit on an educational upgrade. Your ability to land a higher-paying job can certainly be boosted with some college courses. An associate’s degree, a specialty certificate, or even a master’s degree in your field, may make you a more attractive candidate or help prompt the boss to consider a promotion to a better position.

Create a Rainy Day Fund

Though the economy has certainly improved, we’re all aware of the uncertainties that life sometimes throws at us. Unexpected layoffs, sudden medical costs, car accidents, or unplanned travel expenses are all examples. Rather than resorting to credit cards to cover your emergency needs, why not invest that money into a savings account and hold onto it until you really need it?

Think About Your Retirement Plans

In an era of never-ending political drama, the one issue you never hear discussed is America’s retirement crisis. Too many working Americans have entirely neglected to begin building any retirement savings.

Consider using your tax refund as a contribution to an IRA, or use it to put some extra value into your 401(k) savings plan at work. The more you pre-load your retirement savings accounts, the better off you’ll be when you reach retirement age.

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4 of the Best Ways to Get Credit Card Bonuses Without Going into Debt

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In an increasingly crowded and profitable market, credit card companies have gone out of their way to attract new customers with bonus programs and perks. While the appeal of getting bonus cash, airline miles, or other valuable freebies as a result of your purchases may sound like a fantastic deal, remember this simple axiom: “You’ve got to spend money to make money.”

How can you generate those much-desired points without going into debt as a result, and risking your credit score? Here’s some winning strategies.

Pick a Card That Pays – And Use it Wisely

Credit card bonus experts suggest that you do your research to determine what card benefits come with the fewest catches and the biggest overall bang for your buck.

Beware of stipulations that mean you’ll only get your bonus miles or points if you spend a certain amount of money in a certain time. For example, the new Chase Sapphire Preferred card offers 50,000 points on its own travel rewards system – worth $625 – if you spend $4,000 in the first three months.

That may sound like a great deal, but it does require making those new purchases, and like many premium cards, it carries both an annual fee after the first year and a relatively high interest rate. Unless you plan on paying off that balance quickly, interest charges and other fees can eat into your rewards.

Credit card companies know what benefits make them money – hence the rarity of many old-style cards which offered huge mileage bonuses for relatively little use (such as Chase’s lucrative United Airlines MileagePlus card, which has now been phased out).

Consider utilizing a points-for-dollars card when you know you have a major expense on the horizon–a family vacation, a big move, or an appliance purchase–but you’ve already budgeted to cover the costs, and can actually pay off the balance, rather than carrying it as revolving interest.

This also means reading the fine print and even circling some dates on your calendar, just like paying off a “no interest for 6 months” deal on a big box store’s credit card. Reading up on various creditors’ offers can also help separate the major bonuses from the minor distractions.

Concentrate Your Resources

Some educated consumers have figured out the all-or-nothing approach, and have applied that to their credit card purchases once they’ve figured out which card offers the most tangible benefits for regular use.

If you’re a world traveler, a card that offers miles per dollar spent can be a great way of racking up the benefits for free airfare or treating yourself to a first-class upgrade. So consider using that card for almost all of your purchases, which will definitely boost your bonus point balance.

With so many different cards offering their own unique bonuses, we can easily be tempted to spread the resources around, but a concentrated effort with one card will mean a fast path to bigger rewards.

It’s a strategy that pays off if you’re also one who can pay off your balance on time each month, so be sure to wisely budget your use. Also, keep utilization ratios in mind – more than a third of your credit score is measured on how much of your credit you are using at one time. Carrying a high balance can actually damage your credit score, putting you in the market for some credit score help.

Pick the credit card that’s right for you – an airline card, a hotel card or even a premium card such as American Express’s cards – and focusing your use (and your payments) on that single card can rack up the bonuses.

Just the Bare Necessities

A wise but debt-free path to unlocking those bonus dollars or travel benefits can also include using your preferred card for more rudimentary, everyday basics, plus the recurring bills we all face. Again, as long as you are able to pay off those balances in a timely fashion–every time–a big-bonus credit card can be used for gasoline, groceries and your restaurant purchases.

Particularly savvy customers also use their credit cards to pay bills such as their cell phone charges, their monthly internet or cable bill or other recurring monthly bills, all of which can quickly build the bonus points. A bigger purchase, like a year of gym fees, can also be a big bonus-earner, if you also back the card with real cash.

The trick to success here is to recognize the value in doubling up on those expenditures, provided you are actively paying them all off before interest charges set in. As a rule, if you don’t have the financial management resources to remember due dates or make transfers on time, any benefits you’d gain from a series of monthly balance payoffs will quickly disappear.

Remember to Pay on Time

The real key to squeezing every ounce of air mile, cash bonus or travel reward out of your card is to use it wisely–possibly the best piece of advice to anyone trying to build and maintain a positive credit history.

It’s not worth going into debt to “earn” a free trip, an online spending spree, or some room upgrades. If you can’t afford the expenses in the first place, any new expenditure is simply going to result in a higher debt load

If you’re looking for some help fix your credit score, we can provide some answers.

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5 Credit Mistakes You Didn’t Know You Were Making

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Guest article from the Better Credit Blog.

Credit plays an extremely important role in most consumer’s lives. Our credit rating can impact everything from our housing situation to our cost of education. Therefore, it’s important to avoid making mistakes that will result in damaging your credit.

Keep reading to learn about the credit mistakes you may not even know you’re making.

1. Closing Unused Credit Card Accounts

Closing unused credit cards is probably the most common credit mistake people make. Just because you don’t use a particular credit card doesn’t mean that it doesn’t significantly contribute to your credit score.

When you close credit card accounts, even unused credit cards, your credit score can be negatively affected in a couple of ways.

Your credit score is partly determined by how much of your total available credit is currently being used. In other words, your credit card balances compared to their credit limits. This is called credit utilization.

Generally, the lower your credit utilization the better. When you close a credit card, you’re reducing your total available credit and therefore increasing your credit utilization, which reflects negatively on your credit.

In addition, when you close an unused credit card, that credit card will no longer be building positive credit history. Since your credit score is in part determined by how long you’ve had your credit cards, closing the account prevents it from contributing to the length of your credit history.

It’s also worth noting that when you close a credit card account, any negative entries such as late payments or charge offs will remain on your credit report. Closing an account does not erase its payment history, according to Better Credit Blog.

2. Not Challenging Inaccurate Information on Your Credit Report

A recent Federal Trade Commission study found that nearly 1 in 4 Americans have at least one error on their credit report that could negatively affect their credit score.

This means that there is a decent chance you have errors on your credit report that you could easily dispute and in turn potentially see a bump in your credit score.

The mistake that people often make is that they simply don’t monitor their credit report and score on a regular basis, and are therefore unaware that inaccuracies may exist.

You can easily prevent credit reporting inaccuracies from negatively affecting your credit score by proactively monitoring your credit on a monthly basis and disputing errors as soon as they are reported.

3. Frequently Applying For Credit Cards

When you apply for a credit or store card, it’s reported on your credit report as a Hard Inquiry. A hard inquiry indicates that you’re shopping around for credit.

Generally, having one or two hard inquiries on your credit report isn’t going to negatively affect your credit score. However, when the hard inquiries start to add up, you will see a drop in your credit score.

Many people apply for every store card they come across without even knowing it could be potentially damaging to their credit score.

Hard inquiries remain on your credit report for up to two years, however they can only negatively impact your credit score for up to one year. In order to maximize your credit score, avoid applying for new credit too frequently.

4. Not Paying Attention to Your Credit Utilization

Credit utilization has a significant impact on your credit score. Yet, very few people understand exactly how it works.

Credit utilization applies to revolving debt such as credit cards. It is the ratio of credit card balances to credit limits. To give you an example, if you have a credit card with a total credit limit of $2,000 and your current balance is $1,000, the credit utilization for that card is 50%.

As a general rule, you should try to keep your credit utilization under 20% on all your credit cards. Once you start getting above 20% on any individual card, your credit score will start be affected.

Keep an eye on your credit utilization each month and avoid maxing out, or nearly maxing out, any of your credit cards.

5. Neglecting to Rebuild Bad Credit

Bad credit can cause many problems in your life. From being unable to purchase a house or vehicle, to paying higher utility bills. The good news is bad credit can be fixed.

Many people make the mistake of neglecting to take proactive steps in order to better their credit situation. Don’t believe that rebuilding bad credit is an extremely difficult and time consuming endeavor. Rather, by following a few steps, you’ll find that improving your credit is well within your reach.

Learn how you can start repairing your credit and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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Automatic Bill Pay and How It Can Be Beneficial to Your Debt

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Back in the days when credit card statements and billing were exclusively handled by the U.S. Postal Service, folks often had a legitimate excuse when payments were late or somehow got mixed up. We all remember that ever-popular statement, “The check is in the mail.”

Late payments, however, have never been a positive for a credit report. The long-term impact of even one or two late (or even worse, entirely missed) payments can build into a serious strike against your overall credit score, and your ability to receive the benefits of good credit.

The timeliness (or lack thereof) of your payments makes up more than a third of the various factors that go into your credit score, and therefore is a critical factor in helping to maintain a healthy credit picture.

For those who are interested in cleaning up their credit report, a quick fix for the future is a bit of monthly financial planning – and a personal commitment to make those bill payments on time, every time.

Auto-Pay Saves the Day

You’ve likely noticed that all of your creditors issuing monthly bills–credit cards, automobile loan companies, mortgage companies, cell phone carriers, and utilities included–offer the option of making automatic payments from your checking or savings account.

Like automatic payroll deductions from your monthly paycheck or automatic deposit into a banking account, your bills can also be set up to be paid on time, every time.

Unlike the old-fashioned procedure of attaching a canceled check to set up withdrawals or transfers, most companies are now able to arrange for monthly payments with just your account and routing number details.

Set things up and you’ll electronically agree to pay the bill’s monthly balance directly from your bank account, never missing a payment again.

Handle With Care

Auto-pay does require one thing, however: money in your bank account to cover the bills. If you’re lucky enough to have a regular monthly or biweekly paycheck, or a nice float of savings in your bank account, you can figure out approximately how much you’ll need to have on hand to cover your recurring bills.

If, like many of us, your bank account is also subject to some ups and downs in cash flow, automatic bill pay may not be the one-size-fits-all solution. A missed payment due to insufficient funds in your bank account can be just as bad as a late payment, with the additional hassle of NSF check fees from your bank and the card or creditor you were unable to pay.

And if you would like some professional help to fix your credit score, we can provide the answers.

You can carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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