How to Save Your Credit
Even the most financially savvy people make innocent mistakes that can create serious dents in their credit scores. Considering that a higher credit rating can equal lower interest rates, you’ll want to keep your score as high as possible. Here are five pitfalls to avoid.
Having multiple credit cards. If your wallet bulges with high-limit credit cards and a snazzy collection of store cards, this can adversely affect your credit score—even if none of them carry balance. The theory is that you could go crazy and run all of them up and not be able to pay any of them down. Credit scores are computer-generated, so they don’t take into account that you’ve never had problems paying—they just compute that lots of available credit equals high risk. Think about which credit cards you actually need, and get rid of the ones you don’t.
Canceling credit cards. When you do cancel credit cards, don’t do five at once, because this can give the appearance that you’re in some kind of financial trouble. Give it a couple of weeks between cards and you should be fine.
Applying for more credit. Every time you apply for more credit, your score takes a slight hit, so think twice about applying for that store card just because you get 10% of all purchases for a week. The exception to this is when you are shopping around for a car loan or mortgage: If you approach six different banks about getting a mortgage or loan, and do it within a 14-day period, your score will only take one ding instead of six.
Maxing out your card. You should never spend above 80% of your card limit because it looks like you’re having trouble paying off your debt. To maintain a really high credit score, you should only spend 25% of your available credit.
Paying late fees. Late fees can leave a huge red flag on your credit report. And while having one late fee won’t send your credit score down the toilet, it’s a good idea not to have that blemish on your financial character. Call your credit card company’s customer service and give them a good reason why you didn’t make the payment, and see if they’ll drop the charge as a gesture of goodwill. If you aren’t a serial abuser of payment deadlines, there’s a good chance they’ll cut you a break.