Major Factors That Affect Your Credit Score
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Do not max out your available credit and PAY your bills ON time. Paying the required amounts on credit cards on time is critical to a good credit score. Only spend within your budget—carrying balances with high credit card interest rates will cripple the health of your credit!
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Creditors and Credit Agencies like to see responsible management of your available credit. Keep in mind, creditors are not just reviewing your credit card utilization ratios, but also your mortgage and other loans for timely payments.
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Dividing your balance by the available credit limit on your credit card gives you the utilization percentage or ratio. The higher that ratio, the higher your perceived risk is to a creditor. Ideally, try to keep your utilization ratio below 15%.
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The average age of your credit accounts is another important factor of your Credit Score. Be careful closing old credit card accounts even if you are not using them regularly because that will decrease your average age. It is especially helpful to maintain no annual fee credit cards since they will build the average age of your accounts, but not break your budget.
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Be careful about the credit cards you select. Attempt to sign up when the credit card bonuses are at or close to their peak. Be patient—if you apply for too many credit cards in a short time frame, creditors will think you are desperate for money and this can hurt your credit score as well. Remember, the number of credit inquires is also a small component of your overall credit score.
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If you are contemplating a major purchase, like a home--be cautious of applying for credit cards for 1-2 years before that purchase. The best lending rates are generally available to individuals who have scores of 760 or better.
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Successfully applying for new credit cards can actually improve your credit score by decreasing your overall utilization ratio.