Five Ways to Kill Your Credit Rating
Wed Jul 12, 2006 4:59AM EDT
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In light of my recent credit misadventure (which by the way has been fully resolved, thank you all for the kind emails), here's a little piece about what might be ruining your hard-earned credit score. Some of the entries are quite surprising.
Did you know...
- Cancelling old credit cards can cause you to lose points on your rating? (Your credit score is based in part on the length of time your cards have been active. Cancelling an old one can hurt you.)
- Those in-store credit cards you get for a quickie discount can hurt your rating if you have too many, especially if you open them up all at once?
- Unpaid parking tickets can hurt your credit?
The other two tips, carrying a high balance and paying your bill late, are obvious negatives.
What's not covered in the article is the issue of having too many cards, even if they aren't used. I've read that your overall amount of available credit can impact your credit score, because lenders may feel you "already have enough." But credit ratings are a mysterious and basically undocumented thing... Anyone out there in Yahooland got any solid information on whether there's such a thing as "too much credit?"
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2 Posted by siredgebrc on Thu Sep 3, 2009 9:24PM EDT Report Abuse
My understanding (although I don't work in credit services) is that the sum of your credit limits and payments should be below a certain percentage of a person's income- for our mortgage, they wanted us to have total credit payments (including the new mortgage) under 42% of our income. They expressed some concern about open accounts we had but hadn't used but if we reached the limits reached would have pushed our total credit payments over that threshold. We closed the accounts, I got a better paying job (which changed the whole equation), and we got the mortgage. Hope that helps.
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3 Posted by jazzmoney98 on Thu Sep 3, 2009 4:30PM EDT Report Abuse
As far as credit score, no, you've can't have too much credit. The goal is to have a perfect score of 850. Your credit score is used to create a credit profile. A mortgage company may think that you have too much "available credit" where you could sink yourself into debt very quickly and would not be able to meet your financially obligations.
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4 Posted by nickdc1960 on Thu Sep 3, 2009 7:37PM EDT Report Abuse
Frankly, the reason why credit granting is such a mystery is because credit grantors each have their own ways of defining what constitutes good credit risks versus bad credit risks. The real pity that I have personally found is that credit card issuers almost never ask to see a "balance sheet" for a person. They collect data on wages, other forms of income and lines of open credit, but what they neglect to look into are the assets that a person may own. In other words, maybe you worked hard and retired at age 55 with two million dollars in investments, another one million in retirement account assets, and own a million dollar home and another half-million dollar weekend cabin. No mortgages and maybe only a car payment each month. In other words, we are talking about someone worth 4.5 million dollars. But guess what? Most credit card companies don't want to hear about all of that. Instead, they want to know what the man/woman is earning from work? Zero? Then, there is a strong possiblity that credit will not be granted, even though the assets of the individual make him/her a very low risk of defaulting. Nick http://www.creditmanagementworld.com
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1 Posted by leo4yourloan on Thu Sep 3, 2009 6:49PM EDT Report Abuse
I'm in the mortgage business. YES!!! You can definitely have too much credit. If you've already closed some of your credit lines, the impact on your score will even out in a few months. In the meantime, DON'T apply for any new credit. Don't let your credit cards just lay dorment. Use them sparingly (don't run up a $2,800 charge on a $3000 card) and pay them down but not off every month. Within six months your credit score should go up 40 to 90 points.