Retirement & Financial Planning Report

Your credit score is used for purposes other than approving loan requests. You score might be used to evaluate how much you’ll pay for auto and homeowner’s insurance; it may even affect your employment prospects.

Therefore, you should try to get and keep your score as high as possible, even if you don’t intend to borrow money. Don’t assume that paying your bills on time is enough to guarantee good credit. These common errors can depress your credit score.

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* Never taking out debt. Having no credit history is nearly as bad as having a poor history because lenders have no way to judge how you would handle a loan.

* Shopping too much on loan rates. Too many inquiries can damage your credit score. As a rule of thumb, six inquiries within six months will concern a lender.

* Transferring balances on credit cards. This tactic can bring down your credit score.

* Missing the due date. If a payment is even one day overdue, it’s late. Even one late payment can lower your score.

* Co-signing for a loan. The primary borrower’s mistakes will end up on both signers’ credit reports and thus hurt your score.

Oddly, one move to avoid is closing credit card accounts you no longer use. Such a move probably will lower your score. In particular, you should not close out cards you’ve had for a long time. They may represent the oldest credit you have so removing them from your file would shorten your credit history, dropping your credit score.

If you’re carrying balances on other credit cards, canceling cards you don’t use also could hurt. That would increase your outstanding debt, as a percentage of available credit, reducing your score.

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The best strategy? Use each of your cards at some point during the year. Then pay the balance in full and on time.

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