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 5 Factors Weighing Down Your Credit

5 Factors Weighing Down Your Credit

If you’re in the market for a new home this year and you want to secure a great financing rate, you’re going to need to have a good credit score.

But, how are you supposed to know if there is something casting a dark shadow on your credit? Of course, things like late or missed payments are going to negatively impact your credit score when you try to apply for home financing. However, there also are some less-than-obvious factors that can weigh down your credit score.

Here are five factors that could be casting a dark shadow on your credit score:

1. Too many inquiries. Don’t get this bit of information wrong. It is OK to check your credit score every now and then to make sure that everything is in order. However, when someone like a lender or landlord checks your credit, you could be taking a bit of a hit. This is particularly true if you have a lot of inquiries over a short period of time.

2. Overextending your credit. So, you’ve never missed a payment and always pay your bills on time? That’s great. But, if you continue to use your credit and merely make the minimum payments, you could be overshadowing the fact that you make regular payments. When you take away your available amount of credit, you are lowing your credit score – possibly without even knowing. It is better to use your credit, but pay it off each month.

3.  Not knowing or doing anything about inaccurate information. As we’ve mentioned, it is a good thing to be familiar with your credit score. In fact, if you see something that doesn’t quite add up to you, you have every right to – and you should – question it. Letting inaccurate charges remain on your credit report certainly can lower your credit score, whether you realize it or not! Avoid this by staying in tune with what is going on with your credit.

4. Closing old credit cards. It always seems like a good idea to pay off your debts – and, not surprisingly, it is a great idea! However, it is not always the best idea to close accounts that you’ve paid off. Though you are eliminating credit, you also are eliminating available credit, which can lower your credit score. Instead of paying off and closing your credit cards, continue to pay them off, but leave them open. If you’re worried about spending on them—hide the cards!

5. Opening new credit accounts. Just like closing an unused account can weigh down your credit score, so can opening a new one. Opening one new account may not do too much damage to your credit score, but if you routinely open new accounts and keep them all open, you could be hurting your overall credit score. A better practice? Again, using and paying off your current cards. You’ll leave no need for new lines of credit—and, no reason for lowering your credit score!

Now that you’re not in the shadows about a few less-than-obvious things that can negatively impact your credit score, you’re prepared to help your score shine for future purchases—you know, like a new home.