There are many things we do as consumers that can have an affect on our credit rating and credit scores. Many of these points will surprise you! Read on:
1. Paying off old collections, judgments, tax liens and other derogatory records: The key is whether they are old or not. If any of these records are more than 3 years old or more, chances are that they have already been discounted, as to their effect on your credit scores. When one inquires about and pays these types of old accounts off, as much as the intent was to make everything look better, the result is actually the opposite. By bringing attention to these accounts with ANY activity, you advance the date of record to today rather than it being an old record. Now that 3 or 4 year old derogatory account now looks like it just occurred. Thus, your credit score drops dramatically due to a recent collection, judgment or other negative account. Sad but true... Continued...
2. Closing inactive or zero-balance accounts: Contrary to what many so-called experts may say, if you close accounts, whether active or not, your scores will drop initially! Over time, there can be some advantage to closing accounts, and generally, your credit scores will go up... BUT, initially, your scores will actually go down for a similar reason addressed above. You have taken an existing and dormant, innactive account and brought attention to it with new activity. Simply remember... ANY NEW ACTIVITY IN YOUR CREDIT REPORT CAN BRING DOWN YOUR CREDIT SCORES. Eventually, over the 60-120 days after one has closed these types of accounts, your scores can benefit, but it takes time. if you are applying for a mortgage for instance, you are probably better off just leaving these accounts alone. After you close your mortgage loan, you could proceed with closing accounts and becauswe you can afford the time, your scores will improve after a period of time.
More on these Fatal Mistakes coming in the days to follow...
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