3 So-Called Credit Tips That Won’t Improve Your Credit Score

Whether you have a poor credit score or are in good standing, improving your finances is always a helpful thing to do. Consumers are often looking for quick fixes to improve the state of their credit, but sometimes these avenues can actually backfire. Here are a few "helpful tips" that can actually lower your score:

Lower credit limit
If you are one of those consumers who tend to overspend, you may assume that simply asking a bank to lower your credit limit will help curb your spending habits. The justification is if you have a lower limit, you will not be as likely to make a rash purchase. But lowering your balance may actually negatively affect your score.

Approximately 30 percent of your credit score is determined by how much you owe. This is determined by the percentage of debt you have based off your available credit, which is called a credit utilization ratio. Lowering your limit will increase your credit utilization ratio, which in turn will knock your score down a few points. Do your best to use self-restraint instead of lowering your available credit.

Paid in full
If you find yourself in a situation where you can negotiate a way to pay off a debt for less than you owe, that is great, but before you decide to go pay off one of these debts, make sure you take the proper steps.

If you negotiate a debt, whether it a credit card or student loan, for less than you owe, it will be reported as "settled for less than the balance." This small distinction can hurt your credit standing because lenders will see that you were not able to pay off the debt in its entirety. When negotiating to get a debt paid off, make sure you get it marked down as "paid in full." It will show lenders that you are responsible and can pay off your debts. 

Not using a card
You may think that simply putting your credit card in a drawer and never using it can prevent you from raking in anymore debt. While this is a good way to curb your spending habits, not using your card at all can actually hurt your score.

Using a credit card frivolously can get you into a whole heap of debt, but if you are smart and keep track of your spending and debts, you can improve your score. Also, if a creditor sees that you have not used your card in a while, they may close the account which can hurt your utilization ratio.