SOME CREDIT MYTHS - BUSTED!
BUSTED: Going through a divorce is difficult enough without having to worry about separating credit debts. Unfortunately, it’s certainly one of the most important items to focus on as you are navigating through a divorce.
BUSTED: Paying off collections and charge offs will not improve your credit score and could very well lower it. It will not be deleted just becuase you paid it. Actually you will start the clock ticking again and it will remain on your credit report for 7 more years.
Once you pay the account it will change the status to paid, satisfied or settled. This is still very negative on your credit report. It is best to seek professinal help so that you do not create more damage to your credit report by “doing the right thing”.
BUSTED: While it may feel good to kiss that card goodbye, it’s not necessarily a smart move. Closing credit card accounts may actually increase what’s known as your debt-to-credit utilization ratio, which is the sum of all your outstanding credit card debt divided by the sum of all your credit card limits.
A higher utilization is considered risky by the credit bureaus and can potentially drop your score – in the wrong direction. It can also affect your length of credit history which makes up 15% of your score as well. To maximize your score, try to use no more than 10% of all your available credit.
FREE TIPS TO IMPROVE YOUR SCORE
Keep your credit utilization under 30% and as close to 10% as you can to maximize your credit score.
Do not max out your credit cards even if you pay them in full every month. The bureaus will report the high balance and this will decrease your credit score.
Closing old credit accounts has also have a negative impact to your credit score as it will decrease the average age of your accounts.
You should intermittently use all of your credit cards as the card holder will close them if they are dormant for too long.
One 30 day late payment on any open account will drop your credit score 100 points!
You should have a minimum of 3 open trade lines. Two revolving accounts (credit cards) and one installment loan (ex. self lender, auto loan, student loan, etc)
If you have a low credit score a secured card can help you build your credit.
If you are trying to get a home loan then you should not apply for any new accounts unless directed by a credit professional.
Do not pay off collection accounts unless you have consulted with a credit professional. This can under certain circumstances lower your credit score.
Paying your bills on time and keeping your credit cards balances low will go a long way in improving your credit score.
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