5 Actions that Hurt Your Credit Score

by Sara Seeger 8. April 2014

Good Credit, Bad Credit

Establishing a healthy credit history is a responsible action of mature adult and very important to ensure a financially bright future. With the escalating costs of goods and services, it is critical you work towards this goal. In a previous blog, I wrote about five actions that help your credit score, but what about behaviors that hurt your credit score? Ask yourself if any of the following five situations pertain to you.

1. Missing a Creditor Payment

This may sound like a no brainer, but missing a credit card payment could be detrimental to both your current and future credit. Missing just one payment can make your credit score drop. If you make a habit of missing payments because you don’t see an immediate effect, think again. While you’re feeling comfortable, your credit score is plummeting, making it more challenging for you to obtain credit in the future. To add salt to the wound, delaying or missing payments will typically result in a late payment penalty, making it more challenging for you to obtain credit in the future.

2. Closing Old Credit Card Accounts

You have paid off your credit card; congratulations! Some people who are tired of debt immediately choose to close a credit card they have just paid off. You might want to think twice before you close out those old accounts as about 30% of your credit score is based on the amount of debt you have charged. The lower the amount of credit card debt you carry, the better it is for your credit rating due to your “credit utilization rate.” By closing old credit card accounts, you could throw off your credit utilization rate and unintentionally lower your credit score.

3. Accepting Too Many Retail Incentive Card Offers

I know it can be tempting to say yes to the smiling sales associate at your favorite retail store who offers you a 15% discount for opening a credit card, but just say no. Retail credit cards carry much higher interest rates than national brand cards, and applying for that new credit card triggers a hard inquiry on your credit report. Each inquiry of credit may cause a “ding” on your credit score. These inquiries add up fast, and may have a detrimental impact on your credit score.

4. Opening Too Many New Credit Card Accounts

If you open too many new accounts in a short period of time, you may be risking your credit score. Each time your credit is “run” by a creditor to determine your eligibility, your credit score takes a hit. Hard inquiries, as mentioned above, can deduct about 5 points from your score. A familiar example of this happening is someone who purchases a house and opens multiple credit cards at the same time to buy furnishings and other items for their new home. Restrain yourself and buy a little at a time.

5. Shopping Too Long for a Loan

When shopping for a large loan, like a home mortgage, it is important to shop around for a low interest rate. In fact, interest rates can change daily, and could be much lower a month from your first credit inquiry. However, shopping too long for a loan could actually hurt your credit score. Although mortgages and auto loan inquiries will appear on your credit report, they will only count once as long as they are done within a short period of time, typically within 45 days. So, when you make the decision to shop, make sure you’re ready.

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5 Actions that Help Your Credit Score

by Sara Seeger 20. March 2014

Credit Report

A credit score is a three digit number, usually ranging from 300 to 850; the higher the score, the better the credit risk, and by having a better credit risk you could be offered more attractive interest rates on loans. The three main credit bureaus used to evaluate credit worthiness are Equifax, Experian, and TransUnion. Each of these credit bureaus has a slightly different credit range they use when making decisions. If your credit is run and found to be not at the level you expect, don’t fret! While blemished credit can be both stressful and costly, it won’t last forever. No matter how hopeless a situation might seem there are actions you can take immediately to move your credit score in the right direction.

1. Pay Your Bills on Time

One of the best ways to improve your credit score is to pay all of your bills on time. A person’s payment history affects 35 percent of their total credit score. It is imperative to pay at least the minimum balance before it is due. Delinquent payments, even only a few days late, can negatively impact your credit score.

2. Check Your Credit Report Annually

Mistakes can happen. In fact, one-fourth of credit reports contain a serious error, which can affect a credit score. Check your credit report annually. The three major credit bureaus offer a free credit report check once a year. This review will allow you to see any discrepancies or mistakes, and fix them immediately.

3. Develop a Credit History

For newly obtained credit, it is important to not only develop a credit history, but develop a positive and active credit history. Open a credit card account and pay it off responsibly. A great way to do this is to open a credit card, charge a low amount to it per month (anywhere from 20-50 dollars), and pay it off every month. This action creates a successful payment and credit history.

4. Keep Your Credit Card Balance Low

Even if your credit card maximum limit is $2,000 dollars, do not max out that limit. Carrying the maximum balance will actually hurt your credit score. A good rule of thumb is to keep your debt to 30 percent or less of your credit limit. For example, if your credit card limit is $2,000, do not exceed $600 of debt.

5. Establish Different Types of Debt

If you are financially able to obtain different types of debt, it would be beneficial to do so. Lenders like to see that you can manage diverse types of debt. A mix of major credit card loans, car loans, or home loans is healthy for a well-managed credit portfolio.

If you found this article useful, be sure to check out these related articles:

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How to Use LinkedIn to Further Your Career

by Sara Seeger 18. March 2014

LinkedIn Networking

If you haven’t jumped on the social media bandwagon, I would suggest you do so, immediately. In today’s personal and professional world, social media is more than just updating others of your activities, your family, your whereabouts, or your social status. It is about connecting, interacting, and sharing with others. Humans are social creatures and we choose to interact more frequently with each other through social networking websites. While Facebook and Twitter dominate the social and personal connection, LinkedIn has emerged as a go-to site for job and career conversations. It is a great tool to interact with current co-workers and offers an additional benefit of being an interactive resume, which connects you with recruiters and potential future employers. Listed below are a few tips to improve your LinkedIn profile and potentially enhance your career.

1. Effectively Decorated Resume

LinkedIn states that your profile is 40 times more likely to be seen if you have a 100% complete profile. A complete profile includes listing your current and previous positions, listing education information, including a profile photo, utilizing the profile summary and specialties sections, and having at least three recommendations from your connections. Whew, that may seem like a lot of work, but in the long run, the name of the game is visibility. Ensure your LinkedIn profile is as complete as possible and optimize it by using key words throughout your descriptions so that your information becomes more recognizable and searchable. Oh, and most importantly, remember to be truthful.

2. Connect, Connect, Connect

Co-workers- check! Contacts from undergrad- check! Vendors- check! Connect with other LinkedIn members to build your network. Remember, the more connections you have, the more opportunities you have to be noticed. However, getting your information out to the masses is a strategy that requires you to think quality over quantity. Manage your tendency to connect with people you don't know. It is not about gaining the most connections; it’s about connecting with people who can help you accomplish your objective.

3. Be Interactive

The best way to reach more people on LinkedIn is to interact. Join groups that interest you, share article and blog posts, and comment on and “like” articles your connections share. These actions allow your profile to be more visible, while also establishing yourself in your profession or industry.

4. Build Your Resume

Think of your connections as recommendations. To a potential employer, a LinkedIn recommendation is a reference in advance. Ask your supervisors, co-workers, professors, etc. for professional recommendations. Although recommendations don’t take the place of reference letters or calls, they effectively decorate your LinkedIn profile which may increase the chance of it being visible to potential employers.

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