What Affects Your Credit Report?
Your Credit Report: What Affects Your Rating?
If you have worked at maintaining your credit rating, it can be a surprise to hear from your credit card company that they have reduced your credit line. Responsibly managing your line of credit will increase and maintain a high credit score, so when your available credit is reduced, it can do damage to your credit score.
This may happen because credit reporting agencies have the power to examine your credit at any time and make recommendations based on various factors. One role of the credit reporting agencies is to advise credit card companies on high risk behavior. As long as you are responsible with your debt management–keeping it low and paying it off quickly, the credit card companies will be happy to have your business.
Here are some reasons credit reporting agencies might flag your account:
1. Applying for new lines of credit with currently existing unpaid debts
If you continue to open up new revolving lines of credit and continue to increase your debt, this will raise an alert that you may not have the means to repay your debts. This could result in some accounts reducing your available credit line.
2. Too Many Inquiries
Perhaps you’ve been shopping around, looking for a better rate, or perhaps for a credit card that gives mileage benefits or hotel rewards. If your credit has been checked as a result of these inquiries or applications for new credit, credit companies get suspicious. They may fear you are unable to pay off your current card and are looking for new and available credit lines.
3. Revolving Credit
The same philosophy applies to revolving credit. If you tend to shift balances from card to card to card but never pay it off, credit reporting companies see you as a high risk borrower. This indicates low intent to ever pay off your debt. As a result, your credit score could lower and you may lose the ability to juggle debts to lower interest rate cards and introductory offers.
4. Sitting on Debt
Perhaps you are comfortable with the interest rate you have. You know how much you will spend on interest over time and, for whatever reason, are okay just paying the minimum until that debt is paid off. This act of sitting on debt does not impress credit reporting agencies either. On one hand, they appreciate an impeccable record and a person who pays on time. And the banks are only too happy to keep you as a customer! However, if you are sitting on debt, make a commitment to pay it off. If you cannot manage the debt and it doesn’t look like circumstances will improve in the foreseeable future, you’ll need to consider either bankruptcy or debt settlement. Debt settlement is an excellent way to reduce the debts you owe, without marring your credit rating too severely. Paying off your debts will not only make the credit reporting agencies happy, it will save you tons in interest over the years. On the other hand, do use credit to make purchases. Just learn to pay it off quickly!
Pay attention to these simple rules in managing credit card debt. If you borrow responsibly and pay off your debt quickly, you will have nothing to worry about.