Maintaining a good credit score can help your clients get a great rate on a loan, get approved for credit card offers, and also pay lower finance charges on those credit cards. It’s important for your clients to understand which factors affect their credit score since they do have control over many of them.
Making certain financial decisions and checking their credit report at least once a year for errors are some of the best ways to maintain healthy credit. Here are six lesser-known factors that affect the credit score
1. Requesting a credit limit increase
When clients decide to extend their line of credit on one or more credit cards, it’s important to know that the credit card company might perform a hard inquiry to get it approved. Each credit card company handles limit increases differently, but many will run a credit check to make sure the customer still qualifies for the increased line of credit. There is a right time and a wrong time to ask for a credit limit increase, so pay attention to your credit history to know if you should ask for more credit right now.
It’s a good idea to check in with the credit card company about how they handle a request for an increase. If you’re a long time and valued customer, ask if they can perform the increase without a hard inquiry on your report.
2. Closing out unused credit card accounts
Even though they’ve worked hard to pay off credit card balances and have been good about maintaining a zero balance on the account, it's important that your clients know they shouldn’t jump on the chance to close accounts entirely. Their credit score may improve when they have open lines of credit that are left unused because their credit utilization ratio will be lower — an important factor that affects the credit score.
Keep old, unused accounts open, because they show valuable history and improve credit utilization ratio.
3. Using in-house financing
Whether they’re buying furniture or a fancy television, a client might sign the dotted line to take advantage of a 0% APR financing offer or secure an attractive rate on a loan direct from the vendor. These appear to be attractive offers but the application and new line of credit will show up on the credit report. And, if they miss a payment during the promotional period, their interest rate will revert to a higher than average rate which means they will end up paying much more than anticipated just in interest alone. If they end up being unable to afford your minimum monthly payment, missed payments will show up on the credit report and bring down their credit score.
Understand that financing will affect credit scores - even if it seems to not be from a “regular” credit card company. Read all the fine print and know - and meet - all obligations on time.
4. Maxing out credit cards
Even though they may not be going over the limit on a credit card, the fact they are using up all of their available credit on that one card will affect their credit score. The level of debt is calculated based on not only the total debt amount, but also the credit utilization rate on different accounts. Maxing out one or more credit cards could be a red flag that clients are in over their heads financially. This, in turn, lowers their credit score.
Monitor credit card balances carefully to ensure they aren’t slowly creeping up to the limit. A great trick to increase the score is to pay all balances down to below 30% of the available credit line and never charge any more than that even if you pay the bill off in full at the end of the month.
5. Unpaid parking tickets or library fines
This largely depends on where clients live, since some government organizations monitoring fines and fees will report any unpaid balances to a credit bureau while others simply send a series of notices.
Take care of those parking tickets and any other local fees on time or risk paying late payment fees and losing points on your credit score.
6. Eliminating all types of debt
Unless they’re certain they’ll be living a debt-free lifestyle for several years to come and won’t need to apply for credit for any reason, they’ll want to hold on to at least one loan and one credit card account. This is because they need some sort of active credit history to maintain a healthy credit score.
Show on-time payments and plenty of available credit from a variety of sources and types. These types of activities are some factors that contribute to a high credit score.
Credit Repair Cloud Software Secrets
Keeping the credit score in good shape is easier when you know which factors affect your score and how to fix any errors on your report. Using a credit repair software program to help clients with poor credit and encouraging clients to learn more about credit repair secrets to maintain a high credit score are some good places to start.