Beware Of Debts & Credit You Don’t Use
Just as it is very easy to apply for a store credit card, it is also easy to forget you have it. It is important to remember that the account will remain on your report and affect your score as long as it is open. Don’t make the mistake of having credit lines and cards you don’t need. It makes you look more risky from a lenders point of view.
Also, having many accounts you don’t use increases the odds that you will forget about an old account and stop making payments on it, resulting in a lowered credit score. Keep only the accounts you use regularly and consider closing your other accounts. Having fewer accounts will make it easier for you to keep track of your debts and will increase the chances of you having a good credit score.
However, realize that when you close an account, the record of the closed account remains on your credit report and can affect your credit score for some time. In fact, closing unused credit accounts may actually cause your credit score to drop in the short-term, as you will have higher credit balances spread out over a smaller overall credit account base.
For example, if your unused credit limits amount to ,000, and your regularly used accounts also have a credit limit of ,000, you have ,000 of available credit. If you close your unused accounts and owe ,000 on the accounts you use regularly, you have gone from using one-fourth of your credit (,000 owed on a possible ,000) to using one-half of your credit (,000 from a possible ,000). This will actually cause your credit risk rating to drop. In the long term, though, not having extra temptation to charge, and not having credit you don’t need will help you budget.
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Marquel Nov12 Part 2