You might assume that you have excellent credit,
but don’t be so sure.
"People often think that their score is actually higher than it is, partly because credit score formulas are very complex and people don’t know how different factors weigh in,” says Adrian Nazari, CEO of Credit Sesame
For instance, paying your balance in full each month doesn’t guarantee a high score
. In fact, spending more than 30% of your limit could actually hurt your score
, even if you pay it all off on time. So if you, for instance, have a $4,000 limit and you pay off a $2,000 balance each month, call your issuer to ask for a higher limit so that your balance doesn’t exceed 30% of the limit.
You also might think that cutting up an old credit card can help improve your score, but it could actually have the opposite effect. “Because credit scores look at credit history and utilization, cutting up or canceling the account could negatively impact your score,” says Nazari. “If you have an old card, keep it and save it for a rainy day.”
To find out more about what affects your credit score, check out this MainStreet roundup debunking eight common credit myths
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