Mistakes To Avoid With Your Credit Score

By Tim Van Dalsum

Knowing how to avoid mistakes, when it comes to your credit score, can be the difference between an ideal score and a poor score. Some of these mistakes can be hard to detect, and may even seem like the exact opposite of mistakes! But you need to make sure that you are fully informed before making any serious decisions. Making big mistakes, like the one I'm about to reveal, can cause your credit score to drop significantly. This can then lead to less-than-favorable credit terms or loan offers when you do decide to apply. The big mistake that I'm referring to is applying for many different credit accounts or loans within a short period of time.

When applying for several different credit accounts, it's easy to forget how this will be perceived by creditors and lenders. You need to be thinking like one of these companies. When they see a person applying for several different accounts in a very short period of time, the only thing that is going through there head is, "This person has got to either have money problems, or is desperate to receive credit." These are the kind of thoughts that you don't want companies to have about you when applying for credit. I know it's easy to fall into this trap, with all the heavy promoting these companies do to get people to open new accounts. But one of the biggest mistakes you can make, when it comes to your credit score, is to apply for a bunch of different loans or accounts, in a short period of time. So protect your score, and avoid this very common mistake.

Another one of the most common mistakes you can make with your credit score is to neglect to use your oldest credit cards once in a while. As long as you use the card once in a while (every few months) the company will report the activity to the major credit bureaus. When you use your oldest cards make sure to only make a small purchase, and then pay off the purchase in full when you make your payment. Part of your credit score is determined by the oldest account you have, and if you do not occasionally use this card then it will not help you with your credit repair or keep your credit score high.

One tactic that many consumers use (thinking it will help their score), is to lower the credit limit on existing accounts. Often times, people think that by doing this, they can avoid over-spending and help repair their credit score. Unfortunately, this can have extremely detrimental effects. You need to remember that the larger the difference between the balances you owe on your credit and the available credit you have, the better your score is going to be. It's a little ironic, people think that they are doing something positive (limiting the amount of debt they will have) and it ends up hurting them anyway! Just remember that if the gap between the two factors mentioned before is smaller, you are going to be considered a higher credit risk and ultimately, receive a lower FICO score.

Late payments are yet another big mistake that people make with their credit. Even missing one or two payments by a matter of days can be absolutely devastating to your score. This is one of the simplest, yet most common, mistakes that are made by the every day consumer. People really don't understand that late payments can be the difference between a good credit score and an extremely poor credit score.

Another big mistake that consumers make with their credit is moving all high interest account balances onto one card. The thought process here is, "If I move all my high interest account balances onto one card, I will only need to make one payment per month and it will be easier to maintain." That may be true, however, it is important to think about this from a creditor's point of view. If you remember what we talked about earlier (having a larger gap between available credit and account balance will improve credit score), then you will see that his is actually detrimental to your score. By consolidating all credit onto one account, you will be making the gap between your available credit and account balance smaller, which will then lower your credit score.

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