that's balance is closest to its limit. Make the biggest effort to pay as much as you
can to this account while still maintaining at least the minimum balance toward
the other accounts so that you don’t receive any late payments. After that
account is paid down below 40% or so, you can then switch to the account that's
the second closest to its limit. Your goal should be to eventually pay off all of your
debt, continuing in this round-robin fashion. This is part of the normal
suggestions we give customers of The Credit People that are focused on
improving credit scores above all.
Avoid consolidating your debts:
Many people want to transfer their balances to
a single card, either to take advantage of a low rate or for the convenience of
having only one due date and interest rate to worry about. But for credit scoring
purposes, it's typically better to have small balances on a number of cards than a
large balance on one card or other revolving line of credit. That's because the
score looks at the gap between the balance and the limit on each card, as well as
on all of your cards put together.
If you've already consolidated, you should most likely just stay put. Applying for
new credit or transferring balances, as noted earlier, can negatively impact your
score and offset any gain you might achieve.
If you think all this doesn't apply to you because you never carry a balance, think
again.
Having a lack of credit history for any given time can also cause “anxiety” when
formulating your credit score. It might take years, but if you do not use any
credit, it will begin to affect your score over time. More importantly, is how your
“credit mix” is affected by the lack of revolving credit accounts present in your
credit file. This is not the same as having a credit card with a zero balance; this is
when you choose not to have
any
credit cards at all. A lack of credit cards or
“revolving” credit within your credit file will negatively affect your score as well.
Keep these tips in mind when you’re paying debts and closing accounts to ensure
the best possible outcome for your credit score.
