In the last part, we saw how some of our moves that we take to improve the credit score actually ruin the same. You also get to know about the key components that contribute to your FICO score. Therefore, whatever you do to improve your credit, it is very important for you to take care of those components. If you know how they work, you will definitely be able to avoid common mistakes. In this part, I will walk you through some other mistakes to avoid.
Mistake IV: Opting For Too Many Open Lines Of Credit
As you know the types of credit you use contribute to 10% of your credit score. That means if you are having too many open lines of credit, you will be at a higher credit risk. Since you are having so many sources of revolving credit, you can easily rack up lots of debt quickly, which will further damage your FICO score. Therefore, an idea solution is to cancel out all your recent store cards once you have paid them off. Just because they are offering you a great discount, it does not mean you really need those store credit cards.
Mistake V: Asking For A Reduction In Credit Limits
Some people believe that a reduction in their credit limit will improve their FICO score. This is again not true. Instead, such activities will only hurt your credit score. Having a higher limit does not mean that you have to reach it! In fact, it is good to have such a high limit - it makes your credit report look healthy. However, if a high limit is psychologically affecting you badly, you may definitely request for a reduction, but anyhow this will only worsen your credit report. So, be wise and rethink.
Mistake VI: Completely Avoiding Credit Cards
Credit card debts are really nasty ones. Some people hate to use plastic money in an attempt to avoid debts and loans. However, it is very important for you to understand that circumstances are forever changing. You may sometimes be hit with a financial emergency where you will have no other option but to obtain a loan. In such cases, if you do not have a strong credit score, it will be very difficult for you to get a loan at the lowest possible rates. Therefore, a wise approach is to consider getting a card and making occasional purchase using the same. You do not need to reach the max limit. Just use it as much as you need - occasionally. It will help you maintain a solid FICO score that will eventually help you in times of financial crisis.
Thus, we can see that there are plenty of things that seem to work in favor of credit score. In the next and last part, you will get to know about some other common mistakes and how to avoid the same. Meanwhile, please visit my website to get more information on debt reduction and learn how to construct a healthy debt repayment plan.