There are some obvious things that hurt your credit score and some obvious things to increase it, but here are four things you might be doing that will drag your score down. So, if you’re wondering how to increase your credit score, be sure you aren’t doing these four things.
How to Increase Your Credit Score
It’s pretty obvious that if you don’t pay your bills on time or you default on a loan, your credit score is going to go down. I’m also sure you know that if you pay off debt, your score will go up.
If you’re really serious about taking your credit score to the next level, you need to watch the little things because a point here and a few points there will add up until your score dips lower and lower and you can’t get a decent interest rate to save your life.
So, make sure you aren’t doing any of the following:
1.Changing banks – Every time you change banks, for any reason, your credit score will take a hit. It might only be a few points, but if you’re on the edge of credit score ranges, it might also be all that is needed to drop you down to the next level.
When you go to a bank, or even a credit union, to open an account, the bank will do a credit check. There are two types of credit checks. One is called a soft inquiry and the other is a hard inquiry.
A soft inquiry won’t hurt your credit score, but a hard inquiry will. Banks and credit unions do a hard inquiry. This can take up to 5 points off your credit score.
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2. Never using your credit cards – While it’s true that paying off your credit cards is one of the best ways to increase your credit score after you do don’t just throw them into a drawer and forget about them.
If you never use your cards, there is a good chance that the card issuer will close your account. This will really hurt your credit score because it reeks havoc with your debt to credit ratio.
If your account is closed the amount of available credit you have goes down, so the percent of debt you have in relation to your available credit goes up. This is bad.
I know none of us are a fan of math, but this important, so stay with me…
For example, if you have a $3,000 credit limit on a credit card and you pay it off, that credit is still available to you. So, if you have another credit card with a $7,000 credit limit and you have a balance of $3,000, your total credit available is $10,000 and your total debt is $3,000.
That gives you a debt to credit ratio of 30% which is what you want. However, if the credit card issuer closes your account due to you not using the card, your available credit is reduced to $7,000 and your debt to credit ratio is now 42.8%.
If this happens, your credit score will take a deep dive.
3. You’ve got a bunch of unpaid parking tickets – There’s nothing worse than coming back to your car and finding a ticket on the windshield. It’s tempting to throw it on the ground and drive off, or toss it in the backseat and forget about it, but don’t.
Many cities are now turning over those unpaid tickets to collection agencies. Once they do, they will show up on your credit report. It will be seen as an unpaid account, and your credit score could lose up to 100 points over this alone.
So, regardless of how annoying they are, be sure to pay your parking tickets before the due date.
4. Car rentals – Chances are sooner or later you will rent a car. Whether it’s for a vacation or because yours is in the shop, renting a car will ding your credit score. Just like the bank when opening a new account, car rental companies do a hard inquiry when you rent a car. As mentioned before, this can take up to 5 points off your credit score.
When it comes to how to increase your credit score, the best thing you can do for yourself is to keep it from falling off a cliff in the first place.
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