What Can Affect my Credit Score?

So many times we make financial decisions without researching the implications of those decisions. One of the implications that many people overlook when trying to figure out their finances is how those decisions affect your credit score. Even if your credit score is fine, one wrong decision can result in several years of trying to correct your credit score. Don’t get caught in this! Today, we’re going to look at a few things that can affect your credit score.

The amount of your credit that is currently used: This is the one that many people overlook. At one point, I had several thousand dollars of credit and almost as much debt. This made my credit score plummet quite quickly. When I made this number smaller.

The length of your credit history:  Another thing that totally shot my credit score was that I had such a short history. When it was at its worst, I had only 4 years of credit. Now I have almost 10, and it has increased significantly. As your credit history gets longer, there are longer periods of time to compare to. 4 months of delinquent payments (like I had) looks a lot more terrible when compared to 4 years as opposed to being compared to 10. And, since I plan on it never happening again, it’ll be a mere smudge on 20-plus years of credit.

Your payment history: This is the most obvious. If you forget one, it’s really not a huge deal. But, if you keep skipping or forgetting bills, your credit score will start to drop. Just because it’s not necessarily a form  “credit” does not mean it does not affect your credit score. Remember, the credit score assesses how responsible you are with the credit you possess AND with making payments on that credit. If you can’t make payments on your $25 electric bill, how can a loan company expect you to make payments on a $140,000 loan? Things get even worse when you end up having to go through a collection agency.

The number of inquiries on your credit report: People do NOT realize how significant this is. If you are requesting information on your credit too regularly (most professionals suggest once or twice a year), it makes your credit dip. Why? Because if you are checking it too much, it means that you are obviously overly concerned about it, and that looks suspicious.  Now, there are some banks, credit card companies, and credit unions that will track your FICO score, and they do it monthly without affecting your credit. If you are someone who is concerned about that (like I was, because of killing my credit), then these services can help you significantly; contact your bank and/or credit union and ask. Also, the government requires that you have access to a free credit report every year. This also includes other agencies pulling your credit report; if you’re seeking too much credit, it can mar your credit score significantly after awhile.

Keep an eye on your credit score. There may be things affecting it that you don’t realize. Have a great week, and we’ll see you here next week!

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