Remember the old Labyrinth game that used to be so popular? It could get frustrating trying to manipulate the board just right so that the metal ball would successfully navigate the maze. Sometimes, navigating the credit game can be just as frustrating – but the stakes can be a lot higher.
Part of what helps you successfully manage your credit rating is knowing what will affect your score. There are a variety of things that can impact your credit rating positively and negatively, and there are some things that you might think would affect your score that have no impact whatsoever.
Two things that will not affect your score that most people think do are income and denials. Your income is not a factor in determining your score, although it can be a factor in whether or not you are extended credit. And getting denied doesn’t impact your score because no one sees the denials.
Looking at your own credit score also doesn’t impact your credit score, nor do inquiries from insurance companies or pre-approved credit offers. These are called soft inquiries. Hard inquiries, on the other hand, can have a big impact on your score. Every time you apply for credit, the inquiry made based on that application will affect your credit score negatively. In other words, you shouldn’t go applying for every new credit card just because the offer came in the mail.
Your debt to limit ratio will also have a pretty significant impact on your credit score. Your overall debt to limit ratio will affect your score, but each individual account will as well. If you have several lines of credit and most of them have very low balances, that can help, but if you have one or more that are continually flirting with the limit, that will have a negative impact on your score.
Your overall score will de determined based on a number of factors, including debt to limit ratio, the length of time you’ve had credit, what kind of payment history you have, and whether or not you have a bankruptcy, charge off, or outstanding collections on your report.
Maintaining and improving your credit rating can be a simple process:
- use your credit regularly, but never more than you can afford to pay off in a reasonable amount of time
- make sure your credit report is accurate by reviewing it regularly
- make your payments on time, every month
- don’t use credit as a way to extend your income; instead, cut back spending as much as possible