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Unless you are one of the rare few individuals running around who manages to live entirely on a cash basis without a need for credit, your credit score plays a significant part in your life, probably in ways you don’t completely realize. A high credit score has become almost a critical necessity in society, as it can mean the difference between getting a home, a car, a credit card, or even a job.
Credit scores can range from 350 points all the way up to 850, with 850 being perfect credit, and 350 representing credit that has basically been trashed, probably due to a recent bankruptcy or default. A credit score of 620 or less is considered negative and may be a serious risk, relegated to the high risk credit pools when applying for credit and should be worked on faithfully to get improvement. A credit score between 620 and 720 is in the ‘average’ or mediocre range, receiving neither stellar credit interest rates or very poor ones. Credit scores in this range are going to see lenders looking to external factors to make decisions, such as what the income level of the possible borrower is, and having a very high income isn’t necessarily a good thing - a millionaire with a 625 credit score may seem to a lender to be someone who has the means but chooses not to use them responsibly to pay their debts. A credit score above 750 is considered good and eligible for the lower rates offered by a lender, whether they be for a credit card or a mortgage.
Negative Influences on your Credit Score
Your credit score is a snapshot of your credit rating on any given day. It may change significantly from day to day based on your available credit amount changing, (for example, if you sent in a large payment to one of your credit cards, and it doesn’t get credited until the day after your credit score is pulled, you may see a significant improvement the next day). Keeping that in mind, your credit score may be negatively affected by:
- Closing down zero balance credit cards: Credit cards that have a zero balance have the effect on your credit report of increasing your total available credit. This could be a negative for you if you use some of your credit cards every month and this closure reduces your total available credit so that your credit usage among all of your cards exceeds 25%.
- Recent late payments: For those lenders or even your landlord who report regularly to the credit reporting agencies (CRA), if they report that you are 30, 60, 90, or 120+ days late in paying them, your credit score will take a hit and drop.
- Too many credit inquiries: Though the credit reporting agencies now count all inquiries of a similar nature (such as a car, house, credit card) within a 14 day period as a single inquiry, it is still possible to damage your credit in this manner. One example of this would be in trying to get a new mortgage loan, being excited about moving, and needing to go shopping so applying for credit cards, and going shopping, and while you’re at it, let’s get a new car for the new commute. These inquiries will show up on your credit report and cause it to take a negative dive.
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