While things such as missed payments, foreclosures, repossessions, and delinquent accounts are obviously bad for your credit score, certain things that seem like they are neutral or beneficial can actually hurt it. Here is a list of five things that people do not usually associate with bad credit.
Something that contributes to a good credit score that is not obvious is available credit that is not used. If multiple credit cards or accounts are closed within a short period amount of time and the total available credit to a person decreases drastically, the credit score will go down as well. Another surprising fact related to closing accounts if that it can make your overall credit history look shorter. It is actually better for your score to keep old accounts with small balances open because they have a long history of payments. You can get the best card for your credit score without closing old accounts (find some more tips here).
While paying credit cards on time is always good, if only minimum payments are made this can keep the overall debt level high, which is bad for a credit score. It is best to try to maintain lower balances on credit cards and make more than a minimum payment to keep debt levels from ballooning.
If your credit history includes only loans and credit cards, this is a red flag because it only shows debt with no assets. Part of a credit score is a mix of accounts that may show ownership, such as a mortgage or other financial transactions. If a person is only borrowing without a variety of credit, that decreases the score.
While having your credit checked when you buy a car or a home is not necessarily a bad thing, each one of these checks regarding potential transactions actually lowers a credit score. It is best to keep your needs for new sources of credit spread out to avoid the problem of too many inquiries in a short period of time.
The combination of the inquiry before the transaction and the redundancy of having the same account reappear on your credit history will often cause your credit to take a short-term hit. If you need to refinance or consolidate debt, do it! Just be sure to keep making regular payments so your score will bounce back up after this initial drop. Debt relief will help you financially in the end, but you must be responsible along the journey.
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