Two Minor Things That Plummet Your Credit Score

Keeping a good credit score becomes your responsibility once you start using credit cards and taking out loans. Why? Because having a good credit score is essential in your future transactions. It will bring you more access to good loans and credit offers.

If you do the right thing, you can build up your credit score. But do the wrong thing and your score can come rolling down fast. In no time you’ll be getting a bad credit score. Some credit blunders may seem insignificant. However, the tiniest discrepancy can contribute greatly to the decrease of you credit scores. And as you know, a bad credit score can only get you bad credit personal loans. These loans include high interest rates and security pledges. Which is not good news for anyone, right?

One thing that can lower your score is by closing an account. You think sometimes that ending an account is the best solution to your financial problems. But it can actually do more harm than good.

Why? Because credit scoring is based on your standing balance and available credit. When you close an account, it drastically lessens your credit limit. But it doesn’t reduce your remaining balance or debt. So you still have the same amount of debt against a smaller credit limit. Doing the math, it will show as if you have almost used up your credit line. This doesn’t look good to credit bureaus. They will deem you as an irresponsible borrower because of this.

Another key factor in lowering your credit score, would be to leave a credit card dormant. Sure, you may keep a card to be used exclusively for your direst of need. But doing so will give the impression to credit card providers that you are holding off a potential profit. Reporting this to credit bureaus, they will in turn cease to include your card’s credit line in the summation of your score. This will significantly affect your credit utilization ratio.

When you intend to keep a card for emergency use, make it a point to use it at least once in a while. Treat it like a maintenance charge if you will. This way you will be able to utilize its credit line and still have an account for emergency purposes.

These two things are often overlooked and disregarded. They often seem insignificant to your credit scores. But now that you know their effect you can avoid them next time and in turn you’ will avoid unconsciously hurting your credit score.