Should You Fix or Ditch Your Credit Score?

Credit scores, for better or for worse, are used in America to help determine someone’s creditworthiness. This affects all sorts of things from home loans to car loans to rental applications.

Why You Might be Tempted to Give Up On Your Credit Score

What Is the Worst Credit Score You Can Have?

What Affects Your Credit Score?

1. New credit. New credit affects credit reports because it requires a hard pull on your credit. Hard pulls will decrease your credit score temporarily, but it usually bounces back up within a few months. You want to avoid doing multiple hard pulls on your credit in consecutive order because the credit reporting agencies often see this as financially risky behavior and will flag your credit score. 
2. Credit mix. What kind of credit you have is equally important. There are several different kinds of credit: installment credit, revolving credit, and open credit. Each is structured differently and is reported to the crediting agencies in a different manner. Having several different types of credit helps show your creditworthiness because you can manage multiple kinds of debt.
3. Credit history length. Length of credit history is also important. Credit scores want to see that you’ve maintained good relationships with your creditors over long periods of time. This is why new credit will adversely affect your credit score for a few months. It brings down the age of your credit. The more history you have, the more creditworthy you seem.
4. Credit utilization. Along with the amount of money you owe, credit scores will take into consideration how much credit you’re using. What they want to see from consumers is a high credit limit and low credit utilization. A good rule of thumb is to only be utilizing 10% of your available credit on revolving credit accounts. That means that if you have a $1,000 credit limit, you should only be utilizing only $100. Low credit utilization helps prove your creditworthiness because it shows how responsible you can be with using credit in the eyes of credit scoring models. 
5. Payment history. This is the most important component of your credit score. Payment history tracks all the payments you’ve made on all of your accounts. If you can keep your payments current, you’ll score won’t be affected much. But if you fall behind, even one missed payment can negatively affect your credit score.

Opportunities in Life Can Affect Your Credit Score

The Financial Impact of a Bad Credit Score

• Trouble accessing loans. One of the most common problems with bad credit is you’ll be unable to borrow more money. This means that you may have to postpone big purchases like a house or a car and you won’t have any emergency credit to use if you have a seriously bad emergency. While it’s good to stay out of debt, not having access to debt in an emergency could be detrimental to getting the care that you need. And you don’t want your poor credit negatively affecting that. 
• Fewer renting options. Potential landlords will also run your credit to see if you’re going to be a responsible tenant. If you have bad credit, they might deny you rent because they’re not positive that you’ll pay your rent on time. You might have to resort to some shifty living situations if you’re unable to rent from a reputable company—and this could be dangerous for you. 
• Paying a deposit for utilities. You might have trouble with utility companies as well. If they see you have a spotty credit history, they will want payment upfront for your utilities. This will make moves to new dwellings more expensive because you don’t have solid credit.  
• Higher car insurance. Car insurance companies also check credit histories when assessing how much risk they’re going to take on to insure you. If you have poor credit, your rates will go up.

Are There Real Alternatives to Using Your Own Credit Score?

Employer Identification Number (EIN) Schemes

Credit Protection Number (CPN) Scams

What to Do if You’ve Fallen for a Scam

Legitimate Tactics to Fix Rather Than Ditch Your Credit Score

• Pay your bills on time, every time. This is one of the most crucial things you can do to help your credit score. Showing that you can manage money responsibly by paying your bills on time is huge for your score.
• Apply for new credit. This technique works because it diversifies your credit mix and helps increase your total credit limit. Both of these things factor positively into building a good credit score. However, keep in mind that applying for new credit will hurt your credit score in the short term because it requires a hard pull on your credit and a new account will decrease your average age of accounts. With this in mind, you’ll want to only apply for one or two cards at a time and wait a few months before applying for another card. In addition, remember that this strategy is a long game because it will take a few years for your new accounts to gain enough age to significantly help your credit score.
• Increase your credit limit. If you are consistently paying your bills on time, you can ask your lenders for an increase in your credit limit. This technique will reduce your credit utilization, even if you keep spending the same amount of money a month on your card. But, do this only if you’re able to be responsible with your credit. You don’t want to be maxing your card out consistently and being in debt each month. Increasing your credit limit might tempt you to spend more. Don’t use this technique if you cannot handle the temptation.

  

• Sign up for Experian Boost. Experian Boost is an alternative data program that Experian offers. You attach your bank account to their credit reporting system and they track the bills you pay. Monthly bills that you pay on time will increase your credit score. I did it, and it added my Hulu account to my credit report and my score increased by 10 points.
• Pay down any outstanding debt you have. Reducing the amount of money you owe to credit card companies and other lenders is crucial to raising your score. Doing this allows you to reduce your credit utilization. These two numbers are crucial in determining your credit score. You’re going to have higher credit scores if your cards are paid off fully and on time every month. If you’re unable to do that right now, you need to make a plan to start paying off your debt. 
• Check for credit report errors. Another thing that’s helpful is to request your credit report and ensure that you don’t have any errors on your report. Many people find at least one error that can be corrected. You can also look through your report and see exactly what companies you owe money to and if anything is in collections. It’s a great way to check on your financial wellbeing.
• Consider a secured credit card. If you have bad credit, some credit card options might not be available to you. Thankfully credit card companies have created a product that helps those with poor credit improve their scores. Secured credit cards are kind of like credit cards that you prepay. Let’s say you want a secured card with a $500 limit. You pay the credit card company $500 and they hold that as a deposit for your account. That way if you use the card, but don’t pay them back, they already have the money and aren’t at risk if you miss payments.

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