Top 5 Ways to Avoid Hurting Your Credit Score

Your credit score is an incredibly important number. It’s what lenders look at when trying to decide whether to approve you for a home or other type of loan, or to give you a better financing rate. It is also often used to determine your general reliability as a borrower, so it may be used by landlords, for example, to decide if you will be a good renter. Knowing your credit score, and doing whatever you can to improve it, is in your best interest, because having good credit can save you a great deal of money throughout your life.

1. Make Payments on Time

According to information from FICO (formerly the Fair Isaac Corporation), even a single missed payment can cost you heavily, and your payment history accounts for more than a third (about 35 percent) of your total FICO credit score, which is the score mainly used by lenders, landlords, and others.

If you do miss a payment, get yourself up to date with your lender as soon as possible. Keep your loan provider or credit card company informed of your current situation, and work with them in order to arrange a reasonable payback schedule. Any missed payment or other credit mishap will stay on your credit report for seven years, even if you are able to remedy the situation fairly quickly, so do your best to stay on top of your credit and payment schedules from the beginning.

2. Do Not Charge Too Much at One Time

Though your credit card company may give you a high credit limit, and will most likely raise it after you have been a good customer over a period of years, do not consistently charge the maximum amount you are allowed. Having a large amount of debt to pay off, especially if that debt stays large for a significant period of time, could reflect poorly on you and your ability to pay off any major purchases you may make. Try to always keep the amount you are charging on credit well below the maximum limit given to you by the lender.

3. Keep the Number of Cards in Your Wallet to a Minimum

It is common for multiple credit card companies to offer people lines of credit, especially if you have already established a solid credit and spending history. But simply obtaining more lines of credit if you have maxed out one card is not the answer. Staying with the same credit card company or lender for many years is one more way to keep your credit score high. While many people choose to consolidate cards or get various cards to spread their payments across, if possible, retain lines of credit with the same one or two lenders.

4. Build a Solid Credit History Over Time 

A positive credit history is not something you can acquire overnight. The best way to avoid hurting your credit score and to make yourself appealing to lenders is to use credit responsibly over a lengthy period of time.

5. Do Not Be Afraid to Negotiate 

Do not be hesitant to try to talk your way to a better interest rate or other deal. Lenders and credit card companies, though they are of course looking to make a profit, also want to keep valuable, long-term customers. They also want to attract and retain customers who have acted dependably in the past and who have a good history of paying off debt in a timely manner. If you have a long history with a particular company and you want a lower interest rate – perhaps to make it easier for you to continue making payments on time – bring it up with your lender.

In the end, credit providers want good customers that will make them money (by having to pay off a certain amount of interest), but who also are dependable, pay back their debts in full, and stick with them as loyal customers over time. Follow these sensible tips and you can prove to lenders that you will use credit wisely and live within your means.

Additional Resources

Take a look at the official FICO website at www.fico.com. This organization’s report of your credit score is the one many lenders will look to first. For more specific credit score-related tips, see myFico.com.

MSN Money is full of similar pertinent information, and also offers a user-friendly tool to help you estimate your credit score now, which is the first thing you need to know before you can improve it. .

www.AnnualCreditReport.com is another site that can give you your credit report and score from three of the major credit bureaus (Experian, Equifax, and TransUnion), and can also provide information on how to manage your credit wisely.

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