Factors that Raise or Lower Your Credit Score

Maxing out credit cards. It is better to carry small balances on two credit cards than it is to max out one credit card. Try not to use up more than 25% of your available credit on any one credit card in order to improve your credit score. Of course, having too few credit cards or having too many credit cards can also lower your credit score — it depends on your particular credit mix. How many credit cards should you have? There is not a set number of credit card accounts that will maximize your credit score. The average American has seven open credit card accounts, so you probably shouldn’t have more than seven open credit card accounts. Try to use your credit cards on a regular basis to keep your creditors reporting your excellent payment history to the credit bureaus; however, pay off all or most of the card every month.

Account mix. If you have too much of one type of debt, e.g., lots of credit cards but no loans or three car loans but no credit cards, your credit score can suffer. Lenders want to now how you handle different types of debt. You can also be penalized if you open too many new accounts within the last year. For example, if you apply for a mortgage loan and the lender sees on your credit report that you have applied for five credit cards in the last year, the lender can find this alarming.

Too many inquiries. There is a section on your credit report that lists all the companies that have pulled your credit report in the past two years. Too many inquiries and your credit score can decrease; however, it is doubtful that it would decrease significantly. A good rule of thumb is that a few inquiries can lower your credit score by five points. For this reason, you should not make it a habit to shop around for new credit cards on a regular basis.

When your credit score is calculated all inquiries occurring during the last 30 days are not used in the calculation. This allows you to apply for a mortgage or auto loan with several lenders within a 30-day period so that you can compare offers and avoid having your credit score lowered.

You are not penalized when you request a copy of your own credit report. Inquiries made by employers, landlords, service companies (telephone, water, electricity, cable) don’t count either. Inquiries remain on your credit report for only two years and then they must be removed per fair-credit-reporting-act

Editor’s Note:

We at Jewelry Outlet always want to remind our customers why it is important for them to obtain and responsibly use credit. One helpful way to improve one’s credit is by adding a trade line and then only using a small portion of the trade line. This is an example of utilization, which is 30% of the credit score calculation. Thus with a top score of 850, the utilization category is 255 points of the total credit score (850 x .30).

If someone had one department store trade line of $500, but had maxed out the trade line by charging $500 of goods and services, then this person would lose almost all of the 255 points (out of 850), having a very high utilization of 100%. Thus assuming all other things on the person’s credit report were good, the highest credit score this person could achieve might only be 595 (850 – 255), as this person might lose all points for having a high utilization.

But if this person obtained another trade line (maybe a jewelry store account) for $5,000, now the person’s utilization would be only 9% ($500/$5,500). Thus this person’s credit score would increase, maybe by as many as 200+ points, possibly bringing the score up to over 800.

The person’s interest rate on an auto loan with a 595 score might be as high as 20%, whereas the interest rate with an 800 credit score might only be 2% to 5%. If someone purchased a $20,000 car, the lower interest rate would save $250 per month, for having good credit and low utilization.

This is the power of low utilization. And this why it is important to obtain a jewelry store trade line with a high limit.

Jewelry Outlet is the number one online jewelry retailer to help you enhance, establish and/or rebuild your credit. We offer easy credit terms for people with bad credit, new credit and no credit. Click here to Apply for Credit

Posted by Christian C Culpepper