![\"\"](\"\/\/www.askmrcreditcard.com\/news\/wp-content\/uploads\/sevenassumptions.jpg\" "\\"sevenassumptions\\"")
When it comes to your credit score, knowing the facts is important. After all, everyone wants to borrow responsibly, but not everyone knows how the FICO system works. Here are seven assumptions that can lower your score, and the facts that, in time, can raise your score.<\/p>\n
1. The assumption: I pay my bills on time, my credit score is fine.<\/strong><\/p>\n The facts: Paying your bills on time is important, and it accounts for the largest chunk of your FICO score. However, that \u201clargest chunk\u201d is still only 35% of your total score. It pays to know how your score is calculated to help you bump it up.<\/p>\n 2. The assumption: Even though I only have two cards, I use them responsibly.<\/strong><\/p>\n The facts: You should maintain at least three credit cards to maximize your score. There are great reasons for you as a consumer to have multiple cards, as well. If an establishment doesn\u2019t accept a card type, you\u2019ve got an alternative. If the bank decides to change terms to something you find unacceptable, you have options. Perhaps the best reason (and certainly our favorite) is that you can work with the cards that give the best rewards<\/a>.<\/p>\n The mix of your accounts counts for 10% of your credit score. That means that it\u2019s best to have credit cards and installment loans (such as a home or car loan, or student loan) on your report. There is a weak but present correlation in your mix of loans to your future risk, so take care to have your bases covered here.<\/p>\n <\/p>\n 3. The assumption: I never go over my limit, so my score should be high.<\/strong><\/p>\n The facts: Maintaining a limit too near the maximum your card allows will hurt your score. That goes for the balances you carry month-to-month as well as what you charge within the billing cycle.<\/p>\n In fact, charging more than 30% of your available credit in any given month will lower your credit score. It\u2019s tempting to charge everything you , from your water bill to that latte, to get more rewards points, but it will lower your score in the process.<\/p>\n This is another reason it\u2019s a good idea to have more than one card. You can choose what card to use for a given purchase; groceries, bills, incidentals and keep all of your cards under the threshold.<\/p>\n 4. The assumption: Credit is best used as an emergency fund, not something to use for everyday purchases<\/strong><\/p>\n The facts: If you don\u2019t use your accounts, credit card companies don\u2019t report to credit bureaus. Since they\u2019re not able to report that how you\u2019re handling your account, your score doesn\u2019t increase. This doesn\u2019t hurt your score, but it doesn\u2019t raise it, either.<\/p>\n If you leave an account dormant for too long, the company may decide to close it altogether. This reflects more poorly on your credit than a consumer closure.<\/p>\n A simple way to be sure you\u2019re using all of the cards in your cache is to set up a revolving payment on them. Paying something as simple as your phone bill tells the company you\u2019re still using your card and allows them to report that you\u2019re handling your account within the agreed upon terms.<\/p>\n It\u2019s always best to have a cash emergency fund, for many reasons. Cash is liquid and easily accessed when it\u2019s needed. It doesn\u2019t put you in a position to have to repay anything, especially if you\u2019re now or newly out of work such as with a layoff or car accident. Cash also allows you negotiating power. That auto repair might cost you less if the shop doesn\u2019t have to swipe your card. Finally, even in our Smartphone age, not everyone accepts credit cards. It\u2019s best to be prepared for any eventuality!<\/p>\n 5. The assumption: Opening store accounts wherever I go is a smart move.<\/strong><\/p>\n The facts: Sure, that discount is enticing, especially when you\u2019re considering big ticket items like furniture or televisions. The bad news is that going on a credit binge (that is, opening several accounts in a short period of time) decreases your score. In fact, 10% of your credit score is based on the number of hard inquiries reported, and those inquiries stay on your credit report for two years.<\/p>\n It\u2019s hard to pass up the possibility of an immediate savings that feels substantial, and we all want to spend wisely, but consider this: since your credit score is decreased for a short time after each account is opened, you\u2019ll be paying more interest. Every month you\u2019ll end up paying that discount back in the form of higher payments.<\/p>\n The smartest move is to use one of your three major credit cards that is below 30% of its limit, and the one that gives you the best perks. Your score will thank you for it!<\/p>\n 6. The assumption: Closing some of my cards will increase my score.<\/strong><\/p>\n The facts: Closing cards will decrease your available credit, thus inflating the percentage of credit you\u2019re using. If you have $10,000 available across four cards and you\u2019re using $2500, you\u2019re at a comfortable place. Close three of them, and you\u2019re maxed out!<\/p>\n Age of accounts is important to your credit history and accounts for 15% of your total score. Both the age of your oldest account and the average age of your accounts factor in.<\/p>\n 7.\u00a0 The assumption: That library fine and parking ticket I forgot to pay will never make it to my credit report.<\/strong><\/p>\n The facts: More companies are starting to report these small delinquencies, and negative information greatly impacts your score. You don\u2019t want a book returned late or the meter you forgot to feed to haunt you for years to come!<\/p>\n When it comes to your credit score, don\u2019t let your assumptions ruin a potentially great number. Treat your credit like you would any good relationship; keep your old friends around, don\u2019t overlook safe boundaries, and remember the little things. Your score should thrive!<\/p>\n <\/p>\n <\/p>\n If you enjoyed this post you may also like:<\/strong><\/span><\/p>\n When it comes to your credit score, knowing the facts is important. After all, everyone wants to borrow responsibly, but not everyone knows how the FICO system works. Here are seven assumptions that can lower your score, and the facts that, in time, can raise your score. 1. The assumption: I pay my bills on […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[14],"tags":[],"yoast_head":"\n![\"Ask](\"\/\/www.askmrcreditcard.com\/news\/wp-content\/uploads\/askmrcc2.jpg\" "\\"Ask")
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