If you’re under 30, a credit score is like taxes – you know you need to be on top of it but you’re not 100% sure how. When it came to my credit score, I always made sure I did at least two things: stayed away from credit cards and paid every single thing on time, every single month. Granted, I didn’t know much about how credit scores work but I knew credit cards had a bad reputation and that everyone likes to be paid back on time. Luckily, it worked in my favor because I have over a 700 at (almost) 24. Not because I knew what I was doing, but because I used common sense. However, now that I’m getting older, I’ve been taking it upon myself to rely less on what I think I know and more on the facts. I’ve learned that some of the things I thought affected my score actually does not and vice versa. If you’re a 20-something who’s still trying to wrap your mind around this part of adulting,
Here are 7 things that WILL affect your credit score and 5 things that WILL NOT
7 Things That Will:
Applying for multiple credit cards at once
Every time you open a credit card or take out a loan, a lender inquires about your credit report. If you have multiples inquiries in a short period of time, it will affect your credit score.
Credit-reporting agencies consider your debt-to-credit ratio when determining your score. If you have a high balance, you’re almost at your limit and don’t have much available credit left. This comes off as though you are using more than you can afford to pay back.
Simply paying your balances on time might be the best thing you can do for your score. Keep in mind that the later the payment, the bigger the impact.
Closing an old account
Old accounts usually work in your favor because how long you’ve had credit is also important. Secondly, old accounts increase your debt-to-credit ratio and shows that you can handle more than one line of credit.
Waiting until the end of an interest-free period to make a payment
Basically, don’t ever wait to make any type of payments. Even if you can only afford to pay the minimum balance, please do so!
If you owe your local library a late fee or you have unpaid parking tickets, your score will be negatively affected because they can go into collections.
If you share a credit card with someone, it doesn’t matter who made the purchase because both of you are responsible.
5 Things That Will Not
Applying for multiple traditional loans
When applying for auto, student or mortgage loans, you will not be penalized for having multiple inquiries.
Checking your credit score
Soft inquiries (made by you or your potential employer) will not hurt your score.
Home Equity Lines of Credit
People take out HELOCs to finance a home improvement. This means they’re borrowing against the equity they already have in their homes. Because the lender will get its money back if they default, credit-reporting agencies do not include it in the debt-to-credit ratio.
All that matters is that you’re able to make payments on time.
Marrying someone with bad credit
It probably won’t impact your credit score directly but you might want to be careful spending the rest of your life with someone who’s shown you that they can’t make good financial decisions.
For more information, visit Kelly Gurnett’s post here!