How To Fix Your Credit Report: 7 easy ways to hurt your credit score

Here is a great article that details 7 things to avoid if you want to improve your credit rating this year:

"Seven Bad Assumptions That Hurt Your Credit Score"

By Curtis Hill

Many people make the wrong assumptions about how to improve credit rating and how to improve credit scores. Don't believe that your assumptions are correct.

Bad Assumption #1: Lower maximum card limits improves my credit score.

Credit scoring programs don't penalize you for having higher credit limits. However, they do penalize you for having high balance relative to your limits. A $2,000 balance on a card with a $2,500 limit greatly reduces your credit score. However, if you increase the limit to $10,000 on the same card, a higher credit score results because you look less "maxied out" on your credit cards. Moving that balance to a higher maximum limit card could also improve your score.

Bad Assumption #2: Always paying the minimum will result in a good credit score.

Of course not paying the minimum will negatively affect your credit score. However, paying that minimum will not usually result in a good score either. The key issue is keeping your reported outstanding balance low relative to the maximum credit limit. Keeping your balance at less that 10% of the maximum limit is good. A balance over 50% of the maximum could dramatically reduce your credit score.

Bad Assumption #3: Always paying by the due date will result in a good credit score.

Obviously paying late will reduce your credit score, but it takes more than timely payments to get a high credit rating. Why wait to get a paper copy of a bill. Go on line three times a month, review your credit charges, and make on line payments. Thus you are never late. There is less chance of successful identity theft since you see the charges earlier, more often, so you can take corrective action earlier.

But most importantly the reported balance to credit reporting agencies is reduced. What normally gets reported to the credit agencies is the balance on the paper bill. Reducing this balance by paying before the bill is generated will improve your debt ratio and your credit score.

Bad Assumption #4: Paying my bills the day the mail delivers results in a good credit score.

Waiting for the bill in the mail and paying by check through the mail is very 1970. Snap-out-of-it grandma! If you get 10 bills a month, that's 120 chances per year for the post office to mis-deliver or for you to lose the bill. Plus another 120 chances for your return check to get lost in the mail, taken for identity theft, or misdirected to the wrong account. Go on line to make your payments and get verified proof (a transaction confirmation number) that the payment was timely and correctly recorded to your account.

Bad Assumption #5: Closing old credit cards will improve my credit score.

Closing an old account will only reduce the average age of your credit, which will reduce your credit score. Try to keep your older credit lines open. If you need to close some credit lines, do this on your newer credit lines.

Bad Assumption #6: Moving balances to a lower interest rate card will improve my score.

Interest rate and minimum payments are not a factor in determining your credit score. However, opening new accounts, to take advantage of a lower interest rate can be very detrimental to your credit score in three ways. First, a new credit line always reduces you credit score. This reduction can be extreme if you open more than one new account within six months. Second, a new credit line normally requires a new credit inquiry, which will also reduce your credit rating. Third, a new credit line will reduce the average age of your credit, which also reduces your credit rating. Be very judicious in opening new credit accounts.

Bad Assumption #7: Shopping around for the best interest rates will improve my score.

Credit scoring programs do not like changes. Multiple credit inquiries and opening new accounts will reduce your credit rating. Waiting six months between credit inquiries will improve your score. If you are shopping (lets say shopping for a car) try to complete all the similar credit inquiries (car dealership credit inquiries) within 14 days so that they may all be counted as one inquiry by the credit scoring programs. Do not allow people to get your social security number or to run a credit check unless you are serious and ready to buy. Too many inquiries could prevent you from having the credit to buy what you want.

These issues are covered more thoroughly in the book Poor No More: Wealth Is Within Reach by Curtis Hill. http://www.Poor-No-More.com.

Curtis Hill is a Certified Financial Planner™ based in Beverly Hills, CA. Mr. Hill has been a successful financial advisor since 1994 after leading a thriving business management career. Mr. Hill has identified proven "wealth behaviors" to adopt and financial pitfalls to avoid in his book, Poor No More: Wealth is Within Reach.

Article courtesy of: Curtis Hill

Here are credit repair books to take you down the path toward better credit: