You've been working hard, paying your bills on time because you are trying to build your credit. Imagine your shock when you pull your newest score, and it is not where you thought it would be. There are a few sneaky things that can ruin your score, that you probably haven't even thought about.
PSA: Did you know that the *Credit Karma App does NOT give you a *Fico Score? They provide you with a *Vantage Score, which is not what lenders are looking for.
Here are the top 5 Credit Pitfalls to Avoid:
1. Having Incorrect Information-
I mean lets be honest, who really sits down and reads your credit report? Do you pull your free report every year? It's only human nature, Errors do happen and businesses can make mistakes. If your report has incorrect information regarding your financial history, this can drag down your credit score. If you find an error on your report, you will want to dispute it with the credit bureau. This can be a time consuming and tedious process, but it worth it in the long run.
2. Too Many Inquiries-
In today's society, we all shop around! We want to find the best rate, term, and save as much money as possible over the lifetime of our new loan. While saving is the primary goal, here is why you should limit your credit inquiries. Everytime you receive a new quote on rates, Lendes pull what is called a *hard inquiry that now shows up on your credit report. If you are requesting these quotes over a period longer then two weeks, they will each show up individually and affect your score. When you are doing this type of comparison, try your best to ask for quotes within a period of two weeks, so that your credit takes less of a hit.
3. Unpaid Bills-
Your credit score could plummet if you have unpaid bills that go unresolved. Did you miss that late library fee or doctor invoice? This could become an issue is the provider marks the account as delinquent, and turns it into collections. This can have a simple fix of just settling the outstanding fee.
4. Using Too Much, Or Too Little Credit-
"I pay my credit cards in full every month, why is my score still suffering?". This is a great question, even when you are being responsible and paying your account off monthly, maxing out your card can harm your score. For example, if you have a $1,000 line of credit and you charge $999 each month, you’ll earn a black mark on your credit score even if you pay off every dime when the bill comes due.If it is possible, you should try to keep your balance low.
5. Not Using Credit At All-
You may think you are doing the best thing, by not getting caught up in a mess of open credit.. but in reality this is the worst thing for your credit score. You have nothing in your history to prove your financial responsibility. Inactive accounts can also self close over a period of time, which can also take a negative ding to your score.
We took a moment to speak with Robert Buglak at E. Mortgage Management, LLC and he provided us with the following information...
-The FICO Credit Score can range from 300 to 850 and is influenced by five differently weighted factors:
- Payment History (35%)- your tendency to repay your debts and bills on time.
- Amounts Owed (30%)- your total outstanding debt. Financial experts recommend keeping this figure below 30% of your total credit limit, and below 10% if you can.
- Credit History (15%)- based on the length of your credit history.
- New Credit (10%)- impacted when you apply for a new credit card, loan, or line of credit.
- Credit Mix (10%)- ensures you are in good standing with multiple types of credit.
Definitions:
- Fico Score: a person's credit score calculated with software from Fair Isaac Corporation.
- Vantage Score: is a consumer credit-scoring model, created through a joint venture of the three major credit bureaus (Equifax, Experian, and TransUnion)
- Credit Karma: A free app that offers credit scores, reports and insights.
- Hard Inquiry: (also known as “hard pulls”) generally occur when a financial institution, such as a lender or credit card issuer, checks your credit when making a lending decision
Please note, we are not affiliated with Credit Karma, or any credit agency. This information is solely provided for Educational Purposes.