One Quick and Easy Way to Help Your Credit Score
There are many things you can do to increase your credit score and to harm it.
But, there is one simple way to help your credit score, and it’s counterintuitive to many.
Many people decide to cancel credit cards after paying them off thinking that it is a good thing.
The problem is that the score models look at the amount of debt you have compared to your available credit balance.
For instance if you have $5,000 in debt and $20,000 in available credit, your debt ratio is considered low. However, if you have $5,000 in debt and only $6,000 in available credit, you have a high debt ratio. So if you canceled three credit cards, you might show a higher debt ratio and thereby lower your credit score.
So, what should you do? Don’t cancel your credit cards unless you know that you will be unable to avoid the tempation of using them if you don’t.
Instead, use the credit cards a couple of times per year to purchae necessities such as food or gas, and then pay them off. If you like, you could write a check (or set up an online payment) immediately after using the card. This shows credit worthiness and prevents incurring finance charges.
If you would like additional tips for helping your credit, please give me a call at 714-319-9751.