Opening too many accounts at once.
Credit Card sign-up bonuses, discounts and gifts are certainly appealing. However, signing-up for every card offering cash back can be dangerous for your credit. Each application and subsequent credit pull will generate a hard inquiry that will appear on your credit report. Each hard credit card inquiry will cost your score between 3 and 5 points. Though they only negatively impact your score for about half the time, a hard inquiry stays on your report for two years.
Missing a payment.
Missing one payment might seem harmless, but a single delinquency can cost a previously stellar credit score to fall more than 100 points. As long as the one missed payment doesn’t lead to additional problems, your score will start to rebound relatively quickly, getting back to good standing in about 12 months.
Tip: To avoid a big hit, consumers can try calling creditor for a good will deletion. They are more likely to oblige if the late payment was truly atypical behavior.
Having a high credit score is extremely important; however few people understand what can help and what will hinder their credit score. Test your credit knowledge below with a quick true or false quiz.
True or False:
- Having only one credit card leads to a better credit score?
- Every time credit is pulled it is called a “credit inquiry” and will lower someone’s credit score?
- Credit reports can have many different types of information such as: previous addresses, public record information and name variations?
- There are three credit bureaus who give out credit scores. They are always about the same score no matter what bureau you choose?
Answers:
- False. Although just a few credit cards may sound more responsible and may generate a higher credit score, you want to maintain a minimum of 3-4 trade lines reporting to the credit bureaus. A variety of credit cards, installment loans and mortgages is ideal.
- False. There are different reasons for accessing ones credit report and not all will impact someone’s credit score. Insurance companies and some creditors perform what is known as a “soft credit pull” that does not affect the overall credit scores.
- True. There can be a lot of information on a credit report including those items mentioned and more, such as employer, state and federal tax liens and/or judgment for delinquent rent.
- False. Your credit score is a “snapshot” of your credit at the moment the credit report is seen. Each credit bureau has different criteria that they use when analyzing ones credit usage and history. Although in many cases the scores are relatively close to one another, in some cases a delinquency can appear on only one or two of the bureaus reports and can vastly lower those scores given by those bureaus.
FOLLOW US