How to Protect your Credit Score in Four Easy Steps
Do you know the ins and outs of protecting your credit score? If not, you’re not alone. Most of us don’t fully understand our credit scores because there are so many factors that go into determining our FICO score. However, in addition to paying your bills, there are a number of things that can either positively or negatively affect your credit score.
Here is our list of the top four steps you can do to protect your credit score:
- If you don’t want nor need a credit card account any longer your first instinct may be to close that account. However, doing so could mean a lower credit score. It may seem more logical that having too much open credit on your credit score could lower your credit, but actually the opposite is true. Closing a credit card account lowers your available credit, thereby raising your debt-to-income ratio, something that the credit reporting agencies use when determining your credit score.
- If you have any credit cards that are at or near their limit, you could be lowering your credit score. In other words, your credit limit is not an invitation to spend it all. The best rule of thumb when speaking of credit card spending is to limit your spending to no more than 30 percent of your credit limit. Any more than 30 percent could have a negative effect on your FICO score.
- If you fail to make just one or two payments over the course of a year you may not think your credit score would suffer all that much. However, nothing could be further from the truth. In fact, one 30-day delinquent payment could mean as much as a 100 point drop in your credit score. Remember: in order to enjoy a great FICO score you must make all payments on time, without exception.
- Falling into the retail credit card trap could cost you big. If you are inclined to take advantage of those “open an account today and save on your purchase” offers you could be setting yourself up for trouble, as opening a number of credit card accounts at any given time can prove to be detrimental to your credit score. In addition, the high interest typically charged on retail credit cards could put you in over your head quickly in debt.
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