In many ways, your credit score is the key to your financial life. It will decide if you are able to get a loan and at what terms. If your score is bad, you may find yourself unable to live a financially healthy life. Having a high score could lead to high payments. And if you have too many high payments, you may need to take out a cash advance loan to cover other essential expenses in an emergency. Knowing the ways in which your score can be damaged can help you avoid doing so.
Maxing Out Credit Cards
No matter what your ability to pay back the money, maxing out a credit card is never a good idea. You also do not want to hold a high balance. Both of these actions hurt your credit score. A portion of the score is decided by your percentage of available credit. You credit score can even go up by simply holding a low balance. Experts often recommend keeping your credit balances no higher than 35 percent of your available limit.
Missing Payments
Additionally, a vital way to keep your score high is to never miss a payment. Although it may not seem like a big deal missing one, it can hurt your credit score for months or even longer. This makes it extremely important to keep track of your payment due dates. Even if you don’t have all of the money, making a partial payment can be helpful.
One of the best ways to avoid do this is to set up automatic payments through online banking. This ensures that you always know to make a payment even if your forget at first.
Closing Old Accounts
Even if you don’t use a credit card, don’t close it. While you may think this is beneficial, it actually hurts your credit score. By keeping the card open, you can actually boost your score. This contributes to your available credit, which helps your score go up. Closing the account reduces your available credit and debt-to-credit ratio, which negatively affects your score. However, you’ll need to keep these accounts active so they will continue to be reported to credit agencies. This requires you to make occaisonal small purchases with the card and pay back the balance.