If you feel like you’ve been doing everything in your power to improve your credit score, you're not alone. Let us be the first to admit that many aspects of credit can be confusing and even counterintuitive, to say the least.
To help you make the best decisions when it comes to your credit, our Finance Editors worked with Lexington Law Firm to do some digging and discovered some lesser-known factors that could be negatively impacting your credit score.
Here are 5 tips for managing your credit that you may not have known:
1. Don’t avoid credit. Having no credit history is almost the same as - if not worse than - having bad credit because it can make it difficult to borrow money and limit your choices when it comes to things like housing and employment opportunities. This is why you shouldn’t completely avoid using credit. Good credit scores emerge when you use credit responsibly.
2. Be careful when it comes to closing accounts. You may think that paying off a credit card and then closing it would be beneficial to your credit. But you may want to think twice. Canceling a credit card can hurt your score in three ways: it reduces your credit diversity, it can raise your credit utilization ratio, and it can shorten your credit history.
3. Maintain a mix of credit types. Having a mix of different types of credit accounts will often help boost your credit score. You’re best off with both credit cards and installment loans like auto loans or mortgages. However, that doesn’t mean you should take out a new loan just to help your credit mix – that’s where things can get tricky.
4. Apply for more credit only when you need to. Avoiding credit is terrible, but over-applying for credit can also lower your score. Every time you apply for credit, a hard inquiry is made on your account. And, yes, every hard inquiry affects your score, even when your line of credit doesn’t get approved.
5. Look for mistakes on your credit reports. A 2013 FTC study found that one-fifth of Americans have errors on one of their credit reports. In addition, 5% of consumers may have errors that lead them to pay more for things like loans and insurance. This is why monitoring your credit reports is so important – if you can find any errors, you can address them and, hopefully, help your credit and save yourself money
Note: People with common names are more at risk of having items on their credit reports that belong to someone with a similar name. This is just one of many errors you might need to look for.
It’s a lot to take in, but with Lexington Law, you’re never on your own. Instead, an experienced and dedicated legal team will be on your side. Plus, you’ll get a free credit report summary and credit score. With a personal account, you’ll also get easy access to your representative so you can stay in the loop about how to improve your credit.
You don’t have to figure out your credit score mistakes on your own. Let Lexington Law help you get back on the road to a robust financial future.
Update: Lexington Law is offering our readers a free credit repair consultation, which includes your FREE credit report summary and score. You can follow this link, or call 1-833-336-3539 to take advantage of this no-obligation offer.
