1. Revolving a balance
“There's a pretty common myth that you have to have debt in order to have a credit report and a good score,” says Ulzheimer. “That's incorrect. You don't have to have a penny of debt in order to build and maintain great credit reports and scores.”
What to do instead? Use your card responsibly, paying off your entire balance, on time, every month. This counts for 35 percent of your FICO score.
2. Maxing out your cards
Using up all the credit available to you is another bad move. “Even if you’re paying it all back every month, that can have a big negative impact on your credit score,” Colley says. Indeed, your debt utilization ratio—how much of the available credit is in use—counts for 30 percent of your FICO score. FICO High Achievers, with scores above 800 on a scale of 300 to 850, use just 7 percent of available credit.
Besides keeping your debt usage down, you can request a credit limit increase—so long as you don’t use that as an excuse to spend more.
3. Giving up credit cards
If you can’t control your swiping, temporarily hiding your cards might help. But closing your accounts is not so savvy. Not only will that lower your available credit, causing an uptick in your utilization ratio, but it might shorten the length of your credit history, which makes up 15 percent of your FICO score.
4. Missing a payment
Letting one bill slip through the cracks is easy to do, but it’ll cost you. “One thing I see is people attempting to dictate the rules of engagement with their lenders by paying what they want, when they want. This is a horrible idea,” says Ulzheimer. “Take your payment obligations and due dates seriously. Your lenders certainly do.” Setting up automatic payments ensures you’ll never break this rule.
5. Not checking your report
You may manage your credit perfectly, but credit reporting bureaus do not. In 2016, consumers complained to the Consumer Financial Protection Bureau (CFPB) about credit reporting the most—making up 23.2 percent of all 186,494 complaints. And of those complaints, 74 percent were about incorrect information on a credit report.
Be sure to check all three of your credit reports at least once a year to make sure your score is all it deserves to be. You can do so for free at www.annualcreditreport.com.
June 23, 2017
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