Closing Credit Card Accounts will NOT Increase Your Credit Score
Closing credit card accounts actually can hurt your credit score. It is often thought that if someone has many open lines of credit, it is better to close some of those accounts. But there are two main reasons why closing accounts can hurt your credit score.
First, closing accounts will reduce your amount of available credit. Therefore, because a credit score measures the difference between available and used credit, balances appear larger when available credit is reduced. Second, credit scores take into consideration the length of time that someone has had credit. Closing accounts can make your credit history appear shorter than it actually is, thereby reducing your credit score.
Checking Your Credit May NOT Affect Your Credit Scoring
Two types of inquiries can be made into a credit file: hard inquiries and soft inquiries. Hard inquiries occur when you apply for a new line of credit. These appear in the credit file. Having multiple hard inquiries in a short time can hurt your score. Consumers who open many lines of credit in a short time appear risky, as they could be expanding their debt obligations.
Soft inquiries, on the other hand, do not affect your credit score. These occur when you request to view your score or when a credit-card company views consumers’ profiles to make a promotional offer. Although a credit company is viewing the consumers’ files, the inquiry does not impact their credit score unless they apply for a line of credit.
Mortgage inquiries within a 45-day period are treated as only one inquiry in the credit file.
Disputing Information Removes it From Credit Reports
Although disputing incorrect information can have benefits, the limitations of error disputes often are misinterpreted. If there is an error on your credit report, a dispute should be filed with the credit-issuer, which then has 30 days to investigate the dispute. After 30 days, the dispute is resolved or removed from the credit report. Many people incorrectly assume that if a dispute is made, the information will be removed from their credit reports immediately.
Filing a dispute against incorrect information, but not against unfavorable information, is recommended. You cannot dispute information that is hurting a credit score and expect it to be removed. Credit companies investigate thoroughly and can easily recognize when a false dispute has been filed.
Maxing Out Credit Cards Will NOT Improve Your Credit
This can have a negative impact on a credit score. In fact, it is one of the worst things that YOU can do to YOUR credit file.
Maxing out credit cards only reduces your amount of available credit while increasing your amount of debt obligation. Borrowers with maxed-out credit cards look very risky to lenders because they appear to be incurring debt at a much quicker rate than they are paying it off. The more creditors that are owed, the more wary a lender will be about receiving payment.
The best advice about credit cards is:
1. Keep the number of credit cards you have to a minimum;
2. Always pay your bills on time; and
3. Keep credit-card balances at 30 percent of their available credit.
Correcting these common misconceptions can help YOU become more knowledgeable about credit-scoring and help YOU improve your credit score. This is essential to qualifying for the lowest interest rates!
