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:
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.