6 Ways to Ruin Your Credit Score
Credit is necessary to accomplish your goals in life and in dentistry. Be it to pay employees, purchase new technology or equipment, absorb a practice, attend industry conferences or earn continuing education credits, a credit score is a determining factor in getting approval for funding.
Applying for too many cards is one way to hurt your credit score.
It goes without saying that the higher your credit score is, the better. A score of 700 or higher allows you to borrow more and negotiate interest rates and fees. Scores of 800 and above puts you in a position to possibly reap the benefits of special loan categories or terms.
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Earning and maintaining a good credit score requires responsibility and deliberation. If you’re looking to boost your score, there are a number of things you can do — and many things you shouldn’t. Here are six financial mistakes that could have a negative impact on your credit score.
1. Late payments
The timeliness of your payments is one of the biggest factors in determining your credit score, comprising about one-third of the overall score. While it can be a hassle to track multiple bills each month, even missing occasional deadlines can hurt. Enrolling in automatic payments for all recurring debt can make bill management easier. Ultimately, paying bills on time can put you in good standing and increase your credit limits over time.
2. Not checking your score
Getting regular updates on your credit report helps you stay informed about inquiries, payment history and new account activity. In addition to knowing what your score is, reviewing your credit report is an easy way to identify any inaccurate items and fight identity theft. You can sign up through a free service like AnnualCreditReport.com or check your credit card provider’s website or mobile app to see if you can check your score there.
3. Taking it to the limit
Before you max out your credit card, be aware that the best practice is to keep 50 percent to 70 percent of your limit available. Maxing out your credit card can hurt your score. Revolving credit availability (comparing loan balances and debt level to your overall credit limit) makes up about 30 percent of your overall credit score. Making small payments throughout the month helps you to maximize your cash flow.
4. Closing unused cards
Don’t close that old credit card just yet — having 100 percent available on a card that you aren’t using can actually help improve your credit score. When you close a credit card account, it affects the age of your account, which contributes 15 percent to your overall credit score. So even if you don’t really need it, keep that card in your wallet, use it annually and pay it off when it’s due in order to keep the card open and continue aging your account.
5. Applying for too many cards
Be thoughtful before you apply for any new credit card. The rewards might be appealing, but opening a new account or even making an inquiry could drop your score. Inquiries make up 10 percent of your score and the age of your accounts makes up another 15 percent, so limit the number of new accounts you open.
6. Co-signing
Think twice before you co-sign a loan or credit card for someone. If the main guarantor fails to make the payments on time, it will affect your credit score, too. If you do agree to co-sign, it’s a good idea to monitor the account and be prepared to make any stopped or missed the payments. You should also ask to see the credit report of the person for whom you’re considering co-signing — this could affect your decision before you decide to put yourself at risk.
Your options going forward
If you’re making any of these financial mistakes, it’s never too late to work toward correcting them. A good credit score has many benefits, from helping you advance your career or business to helping you realize personal goals and investments, such as purchasing a home or car. The loan amount and credit limit for which you’re approved will be tied to your credit score, so keeping it intact will serve you well in the long run.
Tyler Crawford is chief of business development at Bankers Healthcare Group, the leading provider of financial solutions for health care professionals.
