Credit Coaching Guide – Part 3 (What to avoid)
When trying to improve your credit score or credit history, avoid any of the following:
- Asking a creditor to lower your credit limits. This will reduce that all-important gap between your balances and your available credit, which could hurt your score. If a lender asks you to close an account or get a limit lowered as a condition for getting a loan, you might have to do it — but don’t do so without being asked.
- Making a late payment. The irony here is that a late or missed payment will hurt a good score more than a bad one, dropping a 700-plus score by 100 points or more. If you’ve already got a string of negative items on your credit report, one more won’t have a big impact, but it’s still something you want to avoid if you’re trying to improve your score.
- Consolidating your accounts. Applying for a new account can ding your score. So, too, can transferring balances from a high-limit card to a lower-limit one, or concentrating all or most of your credit-card balances onto a single card. In general, it’s better to have smaller balances on a few cards than a big balance on one.
- Applying for new credit if you’ve already got plenty. On the other hand, applying for and getting an installment loan can help your score if you don’t have any installment accounts, or you’re trying to recover from a credit disaster like bankruptcy.
By the way, all these suggestions work best if you have poor or mediocre scores to begin with. Once you’ve hit the 700 mark, any tweaking you do will tend to have less of a positive impact.
And if your scores are in the “excellent” category, 760 or above, you’ll probably be able to eke out only a few extra points despite your best efforts. There’s really no point sweating the small stuff if you have a 760 credit score since you’re already qualified for the best rates and terms.
If you are in serious, serious credit and financial problems, sometimes the only solution is to file for a bankruptcy. This is a last-ditch thing, though, and should only be done if you’ve dug yourself in so deep that the odds of getting out of debt are little to none.
Check your credit score.
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Along the same lines as consolidating your accounts, just closing down accounts for the sake of it can be damaging. I can understand wanting to have less credit tempting you, especially in a bad debt situation. But just like asking a creditor to lower your limit, it doesn’t really help from a credit score perspective.
We like to think credit repair specialists are unsung heroes in our current financial climate. Many folks are finding themselves with lower credit scores than they want or hit with credit claims that they do not know how to dispute. It always essential to have a good guide who can help build your scores through sound credit coaching through the seemingly arduous and confusing process of repairing their credit and getting back on track financially.