If you’ve ever gone online to get your credit score or visited with a lender to borrow money and found your credit score to be lower than you expected, you may have freaked out at how horrible it was. So, let’s talk through what may have happened. There are a few things that can impact your credit score, sometimes in small ways that don’t last very long, others in more substantial ways that can make you look bad for a very long time.
Next time, before you try to borrow or request a line of credit, do take a look at your credit score and your credit report. Most importantly, if your credit report shows no late payments and reasonable levels of borrowing and debt, then most likely your credit score will also reflect what a wise consumer you are. In order to keep the story of your financial life positive, be very careful not to engage in these activities that may cause your credit score to go down:
1. Never pay a bill late, but if life deals you a hand that makes this one impossible to keep occasionally, call your creditor AHEAD of the due date and tell them exactly what’s happening. Request that they make a note in your record so that lenders looking at it later understand how responsible you tried to be. Never make the creditor spend their time and resources to track you down or contact you first!
2. Don’t close a line of credit or credit card without assessing if that closure will unbalance your debt to available credit ratio as indicated on your credit report. If closing one account down completely makes this ratio get out of whack, your credit score could well go down until other debts are paid off and those numbers re-balance.
3. Do NOT attempt to open several lines of credit over a short period of time. For example, you may be renting an apartment, then working to get all utilities, renters insurance, cable and other services all lined up, then on top of all of this activity opening a home store account so you can start decorating. This kind of credit request flurry will only make some creditors fearful that you may be getting out over your skis and not be able to repay. So, in the middle of all your work to get settled into a new place, you could end up seeing your score go down and possibly see some rejections for credit as a result.
Bottom line is this – if you are looking at your credit report annually and paying close attention to how you manage all your finances, your credit score should never be an issue. However, if you don’t think carefully and research how to best approach each new financial endeavor, you might damage your ability to use credit to your advantage for a very long time.