Low Credit Score? Improve It By NOT Doing The Following
Don’t make the mistake of closing lots of credit accounts just to improve your score. This may seem like a contradiction of what you’ve already learned , but it really isn’t..
Many people think they only need to pay off some debt and close accounts to improve their credit score.. This is not exactly accurate. Carefully consider all factors before deciding to close your accounts..
Keep your credit card accounts active. By closing them, you may find yourself re-applying for new cards and putting your credit history under a microscope..
And, most credit bureaus give high, favorable points to those who have a good, long-term credit history.. That means that closing the credit card account you have had since college may actually hurt you in the long run.
Credit accounts and lines of credit you’re not using? Pay them off and close them!. Doing so may help to improve your credit score – but only if you don’t close long-term accounts you need. Generally speaking, close your most recent accounts first, but only when you’re sure you will not need that credit in the future..
Closing your accounts is a bad idea if:
1) You will be applying for a loan soon. The closing of your accounts will make your credit score drop in the short term and will not allow you to qualify for good loan rates.
2) Closing your accounts will make your overall debt balance too high. If you owe $10 000 now and closing some accounts would leave you with only $1000 of possible credit, you are close to maxing out your credit – which gives you a bad credit rating.
In the short term, closing accounts will not improve your credit score, but in the long run it can be beneficial.
Filed under: Financial Advice