With the introduction of Equifax’s new Beacon 9 scoring system last summer, there are some things you need to be mindful of that can significantly impact your credit score. Most people are not aware of a few simple things that could be pulling their credit scores down by as much as 50-100 points or more. Credit scores range from 300-900 with 900 being the top score. As credit scores play a huge part in obtaining a mortgage and/or other forms of loans, you will want to keep your score at a minimum of 650 or higher. Here are some helpful hints to achieve this.
Balances on Revolving Credit
Running close to or over your Limits on your credit cards and lines of credit will greatly impact your score. With the new scoring system, this seems to be the number one thing that I find that is reducing scores. Try keeping your balances at least 75% or less than the limit. (e.g. if you have a limit of $1000 keep your balance below $750). If you find you are consistently carrying a balance close to your limit, then ask for a limit increase so you can keep a good spread between the balance owing and credit limit. (Keep in mind I am not saying to get into more debt but the bigger the gap the better chance your score won’t be affected).
Payments on time
Make sure you make at least your monthly minimum payment on time and do not skip payments. It’s a myth that you need to have a balance owing to build credit. You can build good credit by using a credit card and paying off the balance in full without going into debt. Also, make sure you don’t ignore debts that are owed such as letting creditors write off the debt and close the account or letting the account go into collections. This won’t go away so deal with the debt by arranging with the Creditor a plan to pay it off. Also, make sure your loans are in good standing and payments are made. If you are feeling you may be falling behind, contact the lender and let them know. Keeping them informed will lead to less of a chance of it having an impact on your credit.
Be careful you aren’t applying for too much credit which will add inquiries to your credit bureau thus potentially bringing down your score. Also, when car shopping make sure every dealer you visit isn’t pulling your credit bureau. Once you’ve found your vehicle and need the loan, at that point let the Dealer check your credit.
Always keep at least two revolving trades open (credit cards, line of credit) however be careful you don’t have too much revolving credit!