Everyone wants a perfect credit score. After all, the key to getting 0% APR credit offers, balance transfer offers, mortgages with low rates, and maybe even a job and an apartment, is to have great credit. But if a good credit score is what you’re after, there’s one mistake you could be about to make.
Never close your credit card accounts. Never. This is a mistake that many people make, thinking they are doing some good old financial housecleaning. But it can kill your credit score. Here’s why: length of credit history is worth 15% of your credit score. So keeping that old store account open, or holding on to that student credit card from college, is really great for your credit score.
Maybe you felt like it was better to close a credit card account because you’d finally paid it off and didn’t want to be tempted to use it again. That’s fine—you can put it in a drawer. But make sure you use it occasionally, say once a year, so that your account won’t be cancelled for inactivity.
There are other things you can do to clean your financial house: make a list of your credit cards, amounts owed, and interest rates. Don’t forget rewards, too. It only makes sense to use the card with the most reward redemption options.
A few other things you should never do
Closing your credit card account sits at the top of the list, but there are a few other things not to ever do, if you want a good credit score.
Don’t pay late. Just make your credit card payment on time. It’s not that hard. Sign up for reminders or auto-pay to make sure you don’t miss a date. If the issue is that you can’t afford to pay, contact a nonprofit credit counselor to talk over your options.
Don’t max out your credit card. Don’t even let it get close to the limit. Keep it at less than half—ideally much less—of how much credit you have. Ten percent is a good guideline. So if you’ve got a credit limit of $5,000, keep that debt to under $500.
Don’t apply for too many cards. Yeah, we know. There are tons of great credit cards out there, with tempting terms and amazing rewards. But if you apply for too many at once, it can have a negative effect on your credit score. Just apply for what you need—and be sure you apply for a card that matches your credit score. There are cards for folks with excellent credit and cards for folks with poor or limited credit, and lots of cards in between. Choose the right one for you.
Don’t forget to order your free credit report, or check your FICO score for free. So many credit card issuers are now partnering with FICO to give you a free credit score every month, right on your statement. Look at it! Don’t bury your head in the sand. Over 80% of credit reports contain mistakes. Make sure yours doesn’t.