The 5 Mistakes You're Making that Ruin Your Credit Rating
It's tough to keep a good credit rating, and even the best of us can accidentally damage our score. There are a myriad of credit risks everywhere, from credit cards, home equity and auto loans, to a dubious health insurance system, and it's easy to make a mistake somewhere along the line. These are the top 5 mistakes, from easiest to hardest, that you might be making to damage your credit score:
1. Closing your account:
Many people close credit card accounts as soon as they pay them off, making this the easiest and most common way that credit ratings are damaged. In fact, I've seen credit scores drop one-hundred points in as little as two months because a misguided consumer closed a couple of credit card accounts. Closing an account hurts your rating because it decreases your "percentage of credit available." Credit scores are based on many factors, but this percentage is one of the most important. The more available (or open) credit you have, the higher your credit score will be. Unless your credit card has an annual fee, NEVER cancel it. In fact, make sure you use it at least once a year to maintain your account -- just don't buy anything that you can't pay off as soon as the bill comes.
2. Maxed out spending
That's right, aside from cancelling your credit cards, using them too much is the easiest way to ruin your credit. Banks like to see credit cards with a high limit, but with little or no balance. These "open" cards indicate a responsible and disciplined consumer. However, if your cards are maxed-out, you're giving banks the impression that you're living beyond your means, and your credit score is going to drop. The easiest fix here is to apply for more credit cards and to request a higher limit on the cards you have. Just make sure you don't use this new credit -- otherwise you're just making your problem worse.
3. Medical Debt Collections
Imagine this scenario: your doctor sends you a bill and you send it to your insurance company, thinking your policy covers it. Turns out, it doesn't, and the company doesn't pay your bill. So the doctor's office turns the unpaid debt over to collections, wreaking havoc on your credit score. Sound scary? It's a lot more common than you might think! Make sure this doesn't happen to you by paying close attention to all your bills, and double-checking with both your doctor's office and health insurance company to make sure every bill is paid. Sure, it might take some time, but the 50 points you'll save on your credit rating will be worth it.
4. Co-signing:
We've all been asked to co-sign a loan by a friend or relative, and while this can be a great way to help someone close to you, it can also result in your credit being ruined. It's very important that you consider the following before co-signing -- YOU are responsible for whatever happens. That means if the person you co-signed for doesn't make the payments, you're expected to. If they file for bankruptcy and include your co-signed loan, the bankruptcy will show on your credit report (even though you haven't filed). Finally, even if you have PROOF that the other person is responsible (i.e. a divorce decree, a statement from that person, etc.) your credit will still be affected by anything they do (or don't do). My advice -- don't co-sign for anyone unless you can afford to make the payment yourself.
5. Overdue Payments
Can't remember to pay your bills? It could be the only thing keeping you from perfect credit! There are tons of people out there who do everything else right, but have poor credit simply because they pay their bills late. To make sure your bills are paid on time, every time, visit your bank and ask about an automatic bill payment program. Once you enrol in this, your bank will automatically send a payment to your creditor each month from your account. This will improve your credit by making sure you're never late with a payment again, and can save you money by preventing late fees!
Article Source: http://www.search-raven.com
About the Author
Author Jason Lancaster, an auto business veteran, developed AccurateAutoAdvice.com. You'll find accurate car buying tips and auto advice.
This article is licensed under a Creative Commons Attribution - No Derivative Works 3.0 Unported License, which means you may freely reprint it, in its entirety, provided you include the author's resource box along with LIVE links (without "nofollow" tags).
by: JasonLancaster
Total views: 22
Word Count: 690
Rating: Not yet rated