Credit Repair: How Being Responsible Might Hurt Your Credit Score

Working on repairing your credit history?

Here are some things that might look smart at first, but can actually end up hurting your credit score.

Removing “good” old debt from your credit history

Once you have paid off a home, car or student loan, you may be tempted to have the debt history removed from your credit report.

Bad idea. This actually works against you.

Credit scores record your responsibility over time–hence the term credit history. You want to establish the longest history of good credit possible.

Keep all good credit attached to your history as long as possible.

Closing Accounts

This is a tricky one.

You do not want to leave all of your accounts
open. Open accounts signify potential access to credit.

Leave a couple of key accounts open—primarily those which you have established longevity and a good payment history.

These accounts should have no balance or a very low balance (less than 30% of the maximum credit limit).

Suddenly Charging More or Paying Less Than You Normally Would

Creditors are looking for consistency. One of the best ways to
maintain or enhance your credit score is by remaining consistent with payments and the range of charges.

Missing payments or paying less will definitely lower your credit score.

When trying to enhance your credit score and still use credit responsibly—keep in mind it is a marathon.

Having No Debt

Being debt-free hinders how high your credit score can go—plain and simple.

Having a zero percent credit utilization (revolving balance) and all of your loans paid in full can actually adversely affect your credit score—once it gets to a certain point.

One of the factors attributed to your credit score is your credit activity. Being debt free, eliminates credit activity and your ability to gain points in that area.

If you are a fan debt-free living (as I am) understand that your
credit score will be good but it will never be great. It’s the cost
of doing business.

Featured image by StockMonkeys.com on Flickr available for use under Creative Commons 2.0 License