August 17, 2010

• Playing The Credit Score Game, Pt.2
     The short and long of paying late.

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  Paying your credit card payment late can also really hurt your credit score. Late payments have a number of consequences. First, paying your credit card payment late may signal to your lender that you are having financial difficulties. Over the past 18 months, lenders wrote off record breaking numbers of card defaults. As a result, many lenders have become pro-active in eliminating risks that may end up as write-offs. In doing so, they have begun lowering credit card limits of individuals that have higher probability of defaulting. Cardholders that pay their card payment late can present a higher risk factor to lenders. Secondly, paying late generates additional fees and penalties. Lastly, paying late will lower your credit score and remains on your credit history for as many as 7 years.

  Do you fall for those point of sale credit card offers that department stores like to tease you with? Typically these offers will save you anywhere from 10 percent to 20 percent if you fall for the marketing strategies. If you are like most shoppers, you decide to open the account and then pay the bill in full and immediately close the account. However, most consumers don't close the account and usually end up just spending more money at the store. Of course, retailers are privy to this information and hence the reason they make such credit card offers. What you also may not be aware of is that each time someone inquires on your credit, it generates an inquiry. Inquiries affect your score and can knock as much as 5 points off each time there is an inquiry on your account.

  The length of your credit history is another factor used to determine your credit score. The longer that credit card account has been open increases your FICO score. Therefore, maintaining accounts for a long time period will help retain that good credit score of yours. If you really feel you need to close an account, close the newest accounts first. This will have the least impact against you score. If you have any questions on how your decision might affect your score, you should consult a professional or one of the three credit reporting bureaus.
  
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