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Don’t Let Simple Mistakes Derail Your Credit Rating

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These days, you’re probably well aware of how large a role your credit score plays in determining your financial standing, and therefore how important it is to maintain the best rating you possibly can.

But there are a lot of little mistakes consumers can make, even when they have good intentions, which can bring their credit score down in a hurry. As a result, being smart about how you manage your accounts is of the utmost importance.

One of the biggest ways you can bring your credit score down considerably is by simply carrying more debt than you should. Experts generally agree that the best way to manage your debt is to never carry debt totaling more than 30 percent of your total credit limits, and the less you owe the better. So if you’re carrying a significant balance on even one of your various credit cards, you should start paying as much as you can into that bill every month.

And in fact, having too many credit cards might not be the best idea in general. It might help you to get a better handle on your finances if you stick to using just two or three of them, because the more you use, the harder it is to keep track of what you owe and to whom. However, while reducing your various balances to zero is obviously a good idea, closing out those accounts after you do so typically is not, because it can lower the average age of your various accounts, which, believe it or not, is considered significant by lenders.

Along the same lines, it’s a good idea to still use credit even if you’re trying to get your accounts under control. Even if you get a credit card that has a low limit that you rarely use, having that will at least help to better establish your credit history and show that you’re responsible in using your accounts.

You probably know that your credit score is used by lenders not just to determine whether you’ll even qualify for lines of credit you may want, but also the interest rates and, occasionally, the fees, you’ll pay on it. For this reason, you’ll want to make sure your credit score is as healthy as possible.

Image: Neeta Lind, via Flickr

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