We often hear many questions about credit scoring, credit reports, and consumer credit issues, so, we thought it might be useful to discuss some common credit score trip-ups that people in Overland Park might fall victim to. There is a lot of information about credit scores on the Internet, as well as a lot of rumors that many people believe, that simply aren’t true. Protecting yourself from these common errors is relatively easy once you know what to look for. Today we are going to review the most common credit score trip-ups that can result in lower scores if you fall victim to them.
If you want to prove that you are a responsible borrower, and thus raise your credit score, can you just open a number of new accounts and make an effort to pay them off on time, all the time? Not really. Creditors don’t like to see a borrower who has opened a lot of new forms of credit in a short amount of time. Instead, it’s better to space out your applications over the course of several months or more. If you do plan on applying for a number of credit forms in a short amount of time, make sure your credit score is high enough already so that any lowering that results from the multiple applications is not significant enough to alter your loan terms.
Another common misconception many people have about credit scores is that if you use, for example, all of your credit cards to the fullest extent possible, and pay those cards off regularly, you’re proving that you are good user of credit, and your score will rise.
This too is a misperception. Creditors like to see borrowers who have a credit utilization ratio that is relatively low. This ratio is a measurement of how much of your available credit you are utilizing at any given time. In general, a utilization ratio of less than 20% is preferable to one of 30% or more. In other words, don’t max out your credit cards, and make sure that you don’t use more than 20% of your total available credit at any given time.
Closing Old Credit Cards
If you have one or more old or unused credit cards lying around, it is generally better for your credit score to brush them off and use them every once in a while instead of closing those accounts. Part of your credit score is based on the average length of each of your current forms of credit. Having older accounts is better for your score than having younger accounts, so closing an old unused credit card account is generally not a good idea. Instead, using the card to make a small purchase every once in a while, and paying the bill when it comes due, will be better for your score than closing an account you don’t really use.
Contact an Overland Park Estate Planning Attorney
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about protecting your credit score, contact an experienced Overland Park estate planning attorney at Parman & Easterday by calling 405-843-6100 or 913-385-9400 to schedule your appointment today.