One should spend less, save more, pay debts, and ditch those credit cards in order to survive in a challenging economy.
But, interestingly, those tactics you are using to cut own on your debt could actually lead to reducing a very important factor in a healthy financial life - your credit score.
It is just common sense to know that the primary way to help maintain a good credit score is, of course, paying bills on time. But issuers are really looking at other factors to determine one's credit score. These are even done without the card holder's knowledge.
It's really a case to case basis, but generally there is really just a thin line between managing your debt and having a good credit score.
Here are some factors that could potentially reduce your credit score. One is having too few credit accounts, which has a very crucial effect on your credit history. Also, if you closing your credit account, which also reduces your available credit, your overall score is also affected.
There are also issuers that will consider your not having used an existing account for so long as another factor to reduce your credit score. Much more, if the issuer itself closes the account, the more it adversely affects your credit score.
Putting together or consolidating multiple accounts into one account is also a way to lose valuable credit points.
There are also some instances that having an excessively high debt balance causes a slash in credit score, even if you paid the balance in full. The problem lies on the overly high amount you charged to your account. You have to take note that issuers consider the total amount of debt you owe them as a large factor in determining the credit score.
Also be wary of no-interest no-payment offers. You must read the fine print first before taking it. Such marketing ploys can cause you to make unwitting decisions that can harm your credit score.
And, always remember to get a copy of your credit report so that you would know if there's a discrepancy or mistake, and if so, you can immediately clarify with the issuer.
By law, all credit card holders are entitled to a free report annually from the three credit bureaus. One free report every four months from the different reporting agencies is a wise choice because you get to maximize the freebies you get. The bottom line here is you should know your credit standing before any other person.