Avoid These Things Which Will Hurt Your Credit

If you are confused about what can and can’t hurt your credit, don’t worry, you are not alone. The changing economy, coupled by a credit card industry that changes its rules by the second, has left many consumers confused about how their actions affect their credit. Here we look at a few things that you might not know can hurt your credit.

• Balance transfers- Consumers are not as likely to see as many balance transfer offers as they were a few years ago, however they are still available to some people. Most people transfer credit card balances to take advantage of a lower interest rate on a new card. Unfortunately this simple act which can save you hundreds of dollars in interest fees will hurt more than likely hurt your credit. If you have to apply for a new credit card in order to take advantage of the balance transfer option, that action alone will lower your score by 5 points or more. In addition to applying for new credit you are also moving a large balance to a card that might not have a high credit limit, therefore increasing your debt to credit ratio which is another factor that plays a role in your credit score. The higher your credit utilization ratio, the lower your credit score.

• Debt relief programs- Individuals struggling with debt have several options to eliminate their debt by using programs designed to pay off debt. Credit counseling, debt management plans and debt negotiation are all processes which can help reduce debt, however they all have a negative impact on your credit score. Whenever possible try to pay down debt without the help of a third party or debt relief process to protect your credit score.

• Not having debt- Yes, it is possible to be punished for being responsible. If you have a credit card which you either pay off the balance each month or do not charge purchases to, you might be hurting your credit score. Each credit scoring agency uses their own formula but in most cases up to 10% of your score is based on the type of credit you have with another 35% based on your payment history. If you are not showing payments on a revolving credit account, your score might pay the price.

• Miscellaneous dings- Many consumers are under the false impression that only credit card and loan accounts are used to calculate your credit score. In reality, every aspect of your personal finances can have an impact on your score. If you are late paying your electric bill or have unpaid library fines, this information can have a negative impact on your credit score.

As we move forward into a new year, hopefully one that shows an improving economy, it is important to understand how your credit score is calculated. The economy may be on the road to recovery, however lenders will continue to be skittish when it comes to offering credit to consumers. Protect your credit and credit worthiness in the event yous should find yourself in need of a loan for a home, automobile or personal emergency.