The two most common myths about your credit score can actually cause damage if you believe them and act on them…
1st Myth: Closing an old account that you don’t use anymore will boost your score.
While its true that having too many accounts can hurt your credit score, that alone is not so much of a problem. The problems arise when you open too many credit accounts at once, or have all of your accounts maxed out. Your debt-to-credit ratio is 30% of your FICO score, so if you cancel any accounts, that raises your ratio of debt to available credit, which is not what you want to do.
The other aspect of your credit score, credit history…35% of your FICO score, is damaged as well when you cancel old accounts. You want to keep the older accounts, they give you a better credit history. If you have negative reporting on an old account, canceling the account won’t take the negative reports off your record, only time will diminish their effect.
2nd Myth: Never using or not having credit cards will improve your FICO score.
There can be a problem if you have too little credit. This can lower your score. Your score will improve if you build a record of maintaining your credit responsibly. Not having any credit doesn’t help you build that record. If you don’t have any accounts 6 months old, you might not even have a score.
The best way to build a good score is to make your payments on time, keep your balances below 30% of your limits, and be patient and responsible.
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Chris &; Karen Highland * 301-831-9947
Turning Point Real Estate
email us: isell4u2@msn.com
Text Us: 301-401-5119
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