Credit Score Boosters and Busters

Do you know the difference between what financial habits can boost or bust your credit score? While certain aspects of your credit score may not be intuitive, it’s simple to learn the most important do’s and don’ts associated with improving your credit score.

Score Buster: Maxing out Your Credit Cards

Anytime that you max out a credit card, your credit score will take a hit. The same goes for if you’re nearing close to your credit limit or maintaining high balances on your credit cards. The more credit you use, the lower your score.

Score Booster: Using Less than 30% of Your Credit Limit

The credit reporting bureaus associate using lots of your available credit with risky financial behavior, so it’s best to put a limit on your credit use. Credit experts encourage consumers to use no more than 30% of their available credit for the best possible credit score.

Score Buster: Missing Payments

Payment history makes up a whopping 35% of your total credit score, so anytime you’re 30, 60, or 90 days late on a payment, it may show up on your credit report and lower your credit score. These negative marks also stay on your credit report for the next seven years.

Score Booster: Creating a Budget

Drafting up a budget can potentially boost your credit score because it allows you to divide your money into specific areas and better manage your finances. A budget helps you know exactly how much money you need to set aside for your utilities, rent, credit card bills, loans, and other necessary categories. When you designate your finances into certain categories, you’ll be less likely to run out of money to pay your bills at the end of the month.

Score Buster: Filing for Bankruptcy

In some dire situations, filing for bankruptcy may be your only financial option. However, if you’re facing bankruptcy, don’t be surprised when your score drops. Unfortunately, filing for bankruptcy will lower your score, and the negative mark will remain remain on your report between seven and 10 years depending on the type of bankruptcy you filed.

Score Booster: Keeping an Eye on Your Credit Report

It’s a good idea to request a free copy of your credit report from the top three credit reporting agencies once a year. Checking out your credit report gives you the opportunity to see where you can improve, but it may also show inaccurate information. Mistakes on your credit report could lower your credit score, so you should scan for errors and immediately report any to the credit bureaus.

Knowing the difference between credit score boosters and busters can you help kick your bad financial habits and build an excellent score.

Chloe Mulliner is a writer and editor for CreditSources.org, an authority website dedicated to unsecured personal loans, loans for people with bad credit, and cash advances.

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Category: Credit Score