Last time we told you about two financial habits or blunders that can wreak havoc on your credit score. Here are three more things that can be a main problem that you should consider before applying for that next auto loan.
Having a Large Balance
About one-third of your credit score depends on your ratio of debt to available credit. As a result, the higher balance you are carrying in total, the lower your credit score is going to be. The new CARD Act requires credit card companies to include a graph on how long it will take you to pay off your particular balance if you only make minimum payments. They must also show you how much you would need to pay on your balance each month to pay it completely off in three years. These and other tools can help you lower the balance you are carrying and raise your credit score considerably.
Opening New Accounts
Every time you open a new credit account, you damage your credit score. The amount of damage you do depends on your current score, the type of account you open and how soon you open new accounts after opening others. Companies check your credit when you apply and each inquiry can drop your score by about five points. You can also risk up to 15 points just by applying. These dings to your report are short-lived, but they can mean higher interest rates if you do not wait until they drop off your report before applying for that auto loan.
Not Paying
Other than late payments, defaulting on your credit card balances is the worst thing you can do to your credit. Unfortunately, more and more people are defaulting these days due to the economic problems we are having. These bits of information will follow you for at least seven years, but you can still start rebuilding your credit as soon as possible.