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Avoiding Mistakes that can Affect Your Credit Score

By Ruth Racey
Published: Wednesday, July 7th, 2010

Each and every one in the USA has a credit score which determines their power to get credit. Most people are aware that the credit score is important but many people are not aware that their scores can be adversely affected by certain things they do. This article will help you understand how to avoid mistakes that can adversely affect your score. 

Closing Certain Credit Card Accounts Can be Bad for You 

People who want to improve their credit score often close credit card accounts which they do not use. Since many people do not use their old credit cards, these accounts are the first to be closed. While closing old credit card accounts these people do not realize that they are doing more damage than good. The reason old credit card accounts should be maintained is because these accounts verify that you have been using the cards since a while and you are a reliable credit taker. As a general rule old payment history is much better for people who want to take credit. Old credit card accounts can benefit you if you use them in limit and you pay the bills on time. 

Maxing Out Your Cards is Not Always Beneficial

Credit cards definitely allow you to shop now and pay later but people who max out their cards are definitely harming their credit score. The amount of credit you take on your current cards is recorded in your payment history and this affects your credit score since people who take a lot of credit on cards are seen as risk takers. Lenders prefer to give credit to people who use 30% – 40% credit below the maximum limit on their card since these people are the ones who often pay off their dues on time. If you want to take a loan then you should consider planning your finances so that you do not max out your cards. 

Missing Payments Can Harm You More than You Thought 

Most people know that missing payments harm their credit score but these people do not know how badly these missing payments can affect them. If you miss payments on a regular basis and you have a record of paying late then new lenders will most likely refuse you credit. If any lender does agree to give you credit then the interest rate offered to you will be extremely high. If you have taken loans then paying off your installments on time should be your first priority.

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