Credit Repair: 3 Instances When Taking a hit on Credit Score is OK
One topic that we often discuss in the field of finance is credit score. More often than not, people are reluctant to make any kind of move that affects their FICO score. They are scared to death of damaging their credit scores. They fear that any wrong move may bring down their credit score affecting their future finances. It is high time to stop making your life miserable by letting your credit score overpower you. There are times when taking a little hit is perfectly fine, in fact it is advisable. We give you 3 such scenarios in which making a sound financial decision protects your credit score even when you might have thought of it as a potential threat to your score.
To Establish a Payment History
You make you debt payments on time expecting your credit score to increase and stay that way forever. Ironically, your payment history constitute only about 35% of your FICO score, and what happens in reality is that the untouched good credit score starts to free-fall. If you have stopped making payments, meaning if there is no consistency in the payments, then the nice, healthy pattern of your on-time payment becomes redundant and this is when your credit utilization falls to 0. Getting a new credit card to maintain your credit score may give you a hard time as it may affect your credit score for up to one year. Without it, however, your credit score will continue to go down. We can, therefore, say that feel free to make purchases but try to keep up with on-time payment pattern.
To Diversify your Credit Mix
Not many people are aware of the fact that they have the leverage to diversify their credit mix without affecting their credit rating. You can maintain a good FICO score by utilizing factors, such as payment history, credit utilization, length of the history for the open credit, and new credit. If all you have got on your report is your home loan, adding a debt payment or a new credit card to your profile will not only help you expand your credit, but also broaden your portfolio’s types of credit.
To Apply for a Better Credit Card
Let’s assume that you have this great opportunity to transfer your balance to a zero percent APR credit card, but you think that applying for a new credit card may affect your credit rating and therefore, drop the idea. Don’t hesitate, and give it a try! It is easy to recover a dip in the credit score. In addition, when you add a new card it improves your credit utilization. So, zero percent APR credit card is worth a dip; however, don’t close your old account unless you considered doing so critical. The length of the credit history constitutes 15% of your credit score and closing your old credit will shorten it, affecting the overall rating. So, you can simply put aside your old credit card and let it get dusty.
The Bottom line
Don’t let you credit score hold you hostage. If you had been ignoring these things thinking that it might affect your credit score, then it is about time you make-up for your mistake. We suggest you to go for all of these suggestions.