August 16, 2010
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Playing The Credit Score Game, Pt.1
Considering the consequences.Do you know what your credit score is? If not, you should consider visiting one of the three credit reporting bureaus, TransUnion, Experian, and Equifax's website, to learn how you can get your credit score. Credit scores which are often referred to as FICO scores, are used by credit card companies, other lenders, insurance companies, and employers to determine eligibility of services. Credit reporting bureaus have begun to change some of the guidelines used to calculate credit cardholders credit scores; however, a few elements still remain. Among them are important points that credit cardholders should heed to help them increase or maintain a higher credit rating. If you have recently experienced a decline in your credit score, it could be a result of one of these points.
Carefully consider the consequences when you close a credit card account. Closing card accounts actually can reduce you credit score. It doesn't make a great deal of sense why trying to get rid of a temptation to spend carelessly would actually reduce your credit score. The reason is because one variable in calculating your credit score is your available credit. Therefore, closing a credit card account actually reduces your available credit which affects your utilization rate. Utilization rate refers to the amount of debt you are carrying in relation to the amount of available credit you have.
Maxing out your credit cards will significantly affect your credit score. The same thing applies to maxing out your card as previously discussed with closing a card account. If you max out your card, you will also be reducing the amount of available credit you have which will once again affect your utilization rate. If you have a higher score, you will see a greater impact on your score than someone who has a lower score. The bottom line, don't believe that just because the bank gave you a high available credit that you should use it all. A rule of thumb is to keep your balance at 30 percent or below your credit limit.