Different Factors That Can Affect Your Credit Score

Different Factors That Can Affect Your Credit Score

Building up credit is good for financing a car, getting pre-approval for a mortgage, and having better approval rates on lines of credit and loans. Good credit makes lenders and credit card companies happy and leaves you free from stress. Right now, you may be looking for the different factors that can affect your credit score in the future. Here’s what you need to know.

Having Too Much Credit

Although credit options are available, it matters whether you take them out or not. By applying for too much credit, you risk your financial health decreasing. And when you have lots of credit, it not only takes longer to pay off, but it postpones major life events, such as figuring out if you’re ready to buy a house. Your mountain of debt creates grave concern among lenders, as they find individuals with high amounts of debt risky.

How To Clear Away Debt

In most cases, you might’ve had the snowball method recommended to you. This method involves organizing debts by amount and paying off the biggest first. This does work, but it splits everything up payment-wise throughout the year. For example, you may have a $2,000 credit card bill. By splitting the bill into many payments, you can pay it off in a year and a half.

Not Using Your Credit Cards Enough

There’s one thing that confuses people: how often to use credit cards. While you should have a credit card, you have to use it wisely. The recommended usage is once every three months, and you should pay it off in full to keep the card active and your score improving.

Paying Late

Overdue payments are never good. In fact, even one missed payment drops your score. If you’re potentially behind on payments, reach out to your lender or creditor. They’ll be happy to negotiate a new payment amount and change the payment date. Sometimes, you may be able to take advantage of a grace period, but it’s up to you to do these things, not the credit card company or lender.

Too Many Hard Inquiries

Hard inquiries are records of companies or lenders reviewing your credit history. These inquiries typically happen after you receive a denial from a credit card company. These hard inquiries don’t change your credit score but reflect how bad your credit is now. You can improve your credit score by reducing the number of times you apply for credit or a loan.

Can You Remove Hard Inquiries?

No, these inquiries stay on your report for at least two years before falling off, as they represent your credit history. However, if you ever find one you didn’t make, you can contact the company immediately and file a dispute.

These are the biggest things that can affect your credit score and prevent you from reaching certain milestones. When you feel ready to take the next financial step in your life, such as buying a house, discuss your options with a financial expert. They can guide you through different money-saving methods to reduce your credit usage and improve your score.