Posts Tagged ‘cards’
Wait what? Why should I Ignore my credit score?
There are so many reasons but we decided to just name the 7 most important.
If you don’t need to buy a car what the point of having a great FICO Score? It’s just kinda silly to put in the effort of building and keeping great credit especially if my girlfriend loves my beat up honda. Its got character!
She has great credit and pays for everything since my credit card only has a limit of $500 a month. I can get used to that!
Looks like we were wrong! You should pay very close attention to your credit score!
To get started right away with building great credit check out our Starter’s Guide To Building And Protecting Your Credit!
but get too many cards or carry balances and it starts to lower your score.
To learn more and how to improve your score read on…
Consumer credit scores clearly take into account the “mix” of credit types and items consumers have on their reports. This part of the credit score is affected by what kinds of accounts a consumer has and how many of each.
The bureaus will score someone higher, for example, if they have an open mortgage, 3 credit cards, 1 auto loan, and a small amount of other open accounts. Low balances and available credit as well as timely payments are also large factors. So having a few cars is beneficial.
But, if a consumer has a ton of credit cards, their scores will be lowered.
If they have several mortgages, their scores will be lower.
Any “unhealthy” account mixes lower their scores.
The preferred number of credit cards appears to be three. This means a consumer will actually have a higher credit score if they have three open credit cards than if they have more or less than three open.
If you have more DO NOT run out and cancel your cards just yet.
Remember, 30% of the score is comprised of balances in relation to credit limit.
So if you have too many, keep your cards open, but focus on having three large balance cards and pay down the balances on time for maximum impact.
Click here to read more about our products and services to help you to get rid of debt and to build healthy credit so that you can have more of what you want out of life.
Your credit score is usually based on five overall factors: 1) credit utilization, 2) payment history, 3) the age of your accounts, 4) the types or mix of credit and 5) credit inquires.
Credit Utilization Rate
Credit usage is, according to many sources, approximately 30% of your credit score1.
Your credit utilization rate, also known as your balance-to-limit ratio compares your total balances to your total credit limits. Generally, the higher your credit utilization (the more you owe vs. the amount of credit available), the lower your credit score will be.
So two key ways to raise your credit score are to pay off your debt as quickly as possible, or shift your balances to a low interest rate card (provided you don’t already have too any cards).
Transferring a balance from one credit card to a new card may add an inquiry to your file, which could cause a temporary but usually small decrease.
However, you if you aren’t taking on new debt and you are increasing your available credit, this should decrease your total balance-to-limit ratio, which may increase your credit score.
Age of Your Credit Accounts
Your credit history accounts for 15% of your credit score1.
Generally, the longer your credit history the higher your score. That’s why it’s important to establish credit early and to make it a habit of paying ON TIME>.
Your credit history is calculated by taking the average the length of your credit accounts and the age of your oldest account.
Balance transfers between existing credit accounts typically won’t impact your score in terms of your credit history. However, when you apply for a new credit card your age of credit will decrease.
Also, if you close a credit account after transferring its balance that can impact your score because it will reduce the overall age of your credit accounts.
Credit Inquires and Why They Matter
New credit inquires make up 10% of your credit score1.
Each time you apply for a new credit card, a “hard inquiry” is placed on your credit report. Hard inquiries from credit card issuers remain on your credit report for 2 years1.
According to FICO, inquires generally only drop a credit score five points or less depending on the other information in your credit report. Too many applications for credit cards can harm your credit score and reduce your chances of approval because it often indicates you pose a higher lending risk.
It’s important to remember that any change in your credit use can affect your score, but over time this could be a positive change. Credit scores frequently move up and down frequently to reflect the information changes within your credit file. Checking your credit score is a good way to keep track of changes to your credit and monitor the impact of positive or negative events.
When considering a balance transfer it’s important to look at the big picture and read the fine print carefully. Understand all the costs involved and think about the cost of the balance transfer versus the long-term cost of carrying high interest debt.
Legal Disclaimer: CR Publishing provides quality and actionable do it yourself products and information to consumers who want to improve credit and/or to get rid of debt.The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.
FICO is a registered trademark of the Fair Isaac Corporation in the United States and other countries.
The short answer is yes. In fact, it can be a great way to avoid late penalties and taking a hit on your credit score while you are on vacation or traveling to an area that you wont have the ability to pay your credit card bills. Many companies and lenders, including Discover and Barclays will allow you to switch your due date as long as it is within that billing cycle.
How is this useful though? In the past if you were traveling you either had to have access to the internet to pay online or pre-pay your statements to avoid any late fees or score penalties. This might still be a great option though because pre-paying statements and getting those balances paid down can free up more spending power without having to worry about going over that magic 30% number we have talked about so many times.
But If you are unable to pre-pay or you know that your budget depends on a check coming in you are able to move that due date and still make on-time or early payments before, during, or after your vacation.
It is important though to stick to your budget each month and especially for your vacation. Be sure to check out 3.5 Tips To Keeping Your Wallet & Credit Safe This Summer before you plan your next summer trip.
Be sure to also grab your copy of our free e-book on 28 credit secrets that banks and credit companies don’t want you to know!
Like us on Facebook for the most up-to-date credit building tactics and news! And get early access to sales and deals on all our credit building materials that can radically change your life.
We have all been there. During the summer or during holidays our credit limits get all used up. We all know that we should really try to keep spending under 30% of our limit each month. Things happen though and sometimes we go over. Yes this can and if you do it often enough WILL hurt your credit score.
Here’s the good news though…
If you have been making regular payments and have a fairly established history on your cards, you can actually ASK for a credit line increase. Increasing your credit line will reduce your credit usage and improve your Utilization Ratio. Thus you will see a relatively fast credit boost. And it will free up some room on your credit line for those budgeted vacation expenses.
Here’s the bad news…
If you don’t practice self control when it comes to your spending, it’s a really fast way to rack up a lot of debt. Now that you got that nice boost in available credit you need keep spending down. And always make sure you are paying your card regularly and if possible paying your entire statement balance each month!
Why you should do this before you travel: Well traveling can be expensive and this might be one of those out of the ordinary months where you spend over 30% of your credit line. If you have been saving though and have the money to pay for your vacation, you now need to have the credit. A boost in your credit utilization can free up your credit line for travel and other vacation expenses while either boosting your score or keeping it where it is now. And that’s a whole lot better than your FICO Score taking a hit when you are trying to enjoy your much deserved family time.
One more thing before you go outside to enjoy the summer weather this weekend… A lot of building and keeping a great score is self control and perseverance. The system is complex and can be confusing at best. But keep at it! Always keep working and never give up even if you feel like you have hit a wall. And remember it takes a lot of self-control to keep that score up.