Most of us try to keep tabs on our credit score and understand how it is calculated. The calculations are generally complex and hard to understand clearly. There are a few things that you might think are helping, but these can harm your score instead.
- Checking Your Score
- Credit scores are important and the most used score is the FICO one you always hear about. There are quite a few different scores out there that can be used, and you might not be aware of them. Auto and Bank credit cards use a different scale than other lenders/credit, too. Pull your scores (free!) at different times of the year from all three bureaus to get a pretty good picture of where you actually are.
- Paying Off the Balance
- Yes, paying off your card is always a good idea and keeps you from getting into debt. However if you charge a bunch of purchases and run up the balance on your card, it still hurts your credit even if you pay it off at the end of the month. The balance that is reported to the credit bureaus can be taken at any time during the month. If your balance is high when the numbers are pulled, then your available credit looks much lower and the ratios don’t look as positive. A good rule of thumb is to keep your balance under 30% of your available credit.
- Getting Rid of Credit Cards
- We have all heard that closing cards can impact your credit score negatively. While this can be true, if you have good credit (say 750 or more), then closing an unused account every once in a while should not hurt you. You don’t want to pay fees on a card you don’t use, and if you have too many cards it may be easier for fraud to occur on your accounts.