Maintaining a good credit score is key to building healthy finances. The higher your credit score, the easier it will be to get approved for a loan, buy a home, or qualify for credit cards with better rates and rewards. While the basics of boosting your credit score are simple (pay bills on time and pay off debt whenever possible), beyond that, things can get a little more complex. Read on for a quick guide to some surprising things that can help, and hurt, your credit score.
HURT: Closing a Credit Card
Paying off a credit card is a fantastic way to improve your credit score—but cancelling a zero-balance card can actually hurt your credit. This is because one less card in your wallet will reduce your total amount of credit, upping your credit utilization ratio. Depending on how long you’ve had the card, closing it could also shorten your credit history. If you do need to cancel a card (perhaps due to high annual fees, or because you don’t trust yourself to not spend), try to pay off other credit accounts to minimize your total balance before cancelling the card.
HELP: Paying Utility Bills
Lenders care about more than just your credit card and loan payments, which is why utility bills have an important role to play in determining your FICO® credit score. Keeping up with utility payments—including gas, electric and water, as well as streaming services in some cases—will give you a higher credit score and prove to potential lenders that you are credit-worthy. Overall, this is good news for borrowers. It means more opportunities for positive payment history to help boost your score.
HURT: Balances on Company Cards
If you’re in possession of a credit card through your company, which is paid off by the business but issued to your name—be careful! Credit inquiries or delinquent payments on a company card can hurt your personal credit, even if you’re not responsible for paying it off. Schedule a meeting with your manager or the company’s finance department if you have any concerns about how a business card could affect your personal credit.
HELP: Having a Mix of Credit
Juggling credit cards, student loans, auto loans and mortgage payments can feel like a hassle, but the good news is that having multiple types of credit in your name is good for your credit score. Lenders like to see a mix of credit, which means a more diverse range of debt can boost your score—as long as you’re still making on-time payments on everything.
HURT: Signing Up for New Cards
Credit card companies are famous for their tempting offers to new cardholders. While there’s nothing wrong with taking advantage of a great offer, be aware that every time you apply for a new card, there will be a new hard inquiry on your credit report—affecting your credit score, whether or not your credit inquiry is approved. To mitigate the potential negative effects on your credit score, limit your applications to cards you truly need, and be sure to check your credit report regularly to see how recent inquiries have affected your score.
HELP: Checking Your Credit Report
It’s a myth that accessing your credit report will hurt your score. In fact, checking your credit report regularly can actually help your credit score, by letting you know what’s going on behind the scenes. Your credit report shows payment history on bills, loans and other debt, along with information such as recent credit inquiries. When reading through your report, make sure you recognize everything listed on the report. If something doesn’t look right, it could be evidence of fraud, or indicate a mistake on behalf of one of your lenders. Get in touch immediately if something doesn’t look right!