The Dos and Donts of Credit Scores Part 2

In an earlier post we talked about the Do’s for good credit, so now it’s time to consider the Don’ts!

A credit score is a really important indicator on how likely you will be to default on a credit card or a loan. Your credit score is determined by a number of different factors, including your payment history, the amounts of money that you owe, the length of credit history, new credit, and what types of credit you are using. Do you pay your bills on time? Do you have any recent late payments? How many times have you been late? Are your cards maxed out, or have you accrued a large amount of debt? How long have you been making use of credit, and have you managed to establish a good credit history? Are you opening new accounts and borrowing more money? How many times have you recently asked for money? These are the concepts that alter whether or not you will be considered worthy of credit or borrowing.

Here are some basic do’s and don’ts for smart credit use to help you obtain a better credit score:

Don’ts:

1 – Don’t open a bunch of loans or credit card accounts if you do not need them. Having one single credit card or line of credit for emergencies is a good thing to do, but you do not need a dozen credit card accounts just because it’s nice to have credit. They will only serve as an excuse to use the money, which will dig a nice big hole of debt for you that you can probably do without.

2 – Do not transfer the credit card balance on one card to another. It is better to simply pay each down gradually, one at a time or both at once, rather than transferring money from one card to another in order to compensate for your inability to pay both cards at one time, as this will only dig a bigger hole that you will need to fill.

3 – Don’t open a lot of new credit or loans up all at once, especially if you are brand new to the world of borrowing. If you build up a lot of accounts quickly, even if your credit is good, this can look risky because it will convince lenders that you are desperate for money and probably not a good risk as far as creditworthiness is concerned.

Credit scores make a really large difference when it comes to telling a lender or a credit card company whether or not you are a safe bet. Lenders do not want to lend to high risk borrowers, so if you practice any of the aforementioned don’ts, you will be perceived as a risky borrower and this will prevent you from getting the credit or loan that you do need when you need it.

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