Credit scores are becoming increasingly important in the world today. Not only will your credit score affect your ability to get a mortgage or an auto loan, but your credit score can also affect how much you pay to start a cell phone plan, hook up to public utilities, and even in some cases be used to determine your suitability for employment. That’s why it’s more important than ever to keep a high credit score. Yet millions of Americans make one very simple mistake that sabotages their chances of keeping their credit score high.
For many Americans, the majority of their credit history is made up of credit card accounts. And as most people know, the best way to use credit cards is to pay them off at the end of each billing cycle. Not only does that keep you from paying interest on previous purchases, it also keeps you from having to pay interest on future purchases and it positively affects your credit score. Yet millions of Americans are under the impression that keeping a small balance on their credit cards from month to month has a positive impact on their credit score. It doesn’t, and people who do that are hurting their credit score for years to come.
In fact, 22 percent of respondents in a recent survey stated that they keep a balance on their credit card specifically to try to boost their credit scores. But it doesn’t work that way. Keeping a balance from month to month indicates that you’re not able to pay your bills on time, which means you’re not a good credit risk. So nearly one quarter of credit card users are actively hurting their credit scores under the mistaken impression that they are actually helping themselves. That’s a financial own goal that’s easily avoidable, so don’t make that mistake. And if you want to boost your credit score, here are some tips that can help you do that.
1. Pay all your bills and loans on time.
2. Keep balances low on credit cards and revolving credit accounts.
3. Don’t open new accounts just to boost your credit limit. Opening too many accounts will hurt your credit score in the short term, and hard credit inquiries can remain on your credit report for up to two years.
4. Make sure your credit reports are accurate.
5. Don’t close older unused accounts if your other accounts are too young. Credit age is an important factor in your credit score, so the older the average age of your accounts the better.
