Three Bad Choices That Can Damage Your Credit Score
Your credit score is a big deal. Lenders use that number to decide what kind of loan you’ll be able to get and what interest rate you’ll have to pay. If your credit score is low, you should find some ways to raise it.
There are three things you should avoid in order to protect your credit score – never cosign a loan, avoid closing out credit lines and not checking your credit on a regular basis.
- Never cosign a loan: We all want to do nice things for the people we care about, but if you want to protect your credit score, cosigning a loan may not be in your best interest. As a cosigner on a loan, you are equally responsible for repayment as the primary borrower. If the borrower starts making late payments or worse, missing payments, your credit score will take a hit. The last thing you want to have to do is make someone else’s loan payment to keep your credit score up and get absolutely nothing in return.
- Avoid closing out credit lines: If you are considering closing old credit card accounts, you might want to reconsider as your credit score could be negatively impacted in two different ways. First, cards that have a long credit history are good for your credit score. Second, closing those accounts will lower your amount of available credit which could negatively affect your credit utilization ratio.
- Not checking your credit on a regular basis: It is important to know what is on your credit report. If you haven’t looked at yours recently, or ever, check out annualcreditreport.com where you can fill out one form to request your free credit report from the three nationwide credit reporting agencies who are required to provide you with a free copy of your credit report annually. If you don’t keep an eye on your credit report, you could have your identity stolen and not know it. Even if nothing malicious is happening to you, there could still be inaccuracies.