The recent financial trends have not been encouraging for those who have bad credit or little credit. The rise in foreclosures, the steady climb in inflation that outstrip the rise in wages, the astronomical increase in gas prices all combine to make several of us think of our financial situation and our credit rating.

A slight move in your credit score can make a world of a difference when it comes to the interest rate you will pay for loans such as auto and mortgage loans. Here are five things that affect your credit rating negatively.

#1 The biggest factor affecting your FICO score is your payment history: How promptly you pay and how often you’ve been delinquent on monthly payments. If you are late on your bill payments, event a 30 day late on credit cards or regular bills such as utilities, phone or house payments and your FICO score will begin to decrease dramatically for each late payment. So it is very important that you pay your bills on time. There is no room for procrastination when it comes to your credit.

#2 If you have applied for any new credit accounts - which is usually an indication of risk,  your FICO score will be reduce, so you will want to restrain your tendency of applying for any new accounts. Try keeping your accounts to a tolerable or sustainable minimum.

#3 If you are like the millions of Americans who have recently been served with collection agency notices, repossessions, foreclosures, tax liens, or bankruptcies your credit score will be affected. On a good note, the credit agencies have recently changed the way they calculate your FICO score. If you suspect discrepancies in your credit report you can check with the companies that you owed and have the credit reporting agencies (Experian, Equifax and TransUnion) recalculate your FICO score.

#4 If you have closed any credit card accounts, seen an increase in credit card balances or had credit limits reduced, your credit ratings can be reduced. These activities can affect the ratio between how much credit you’re using and how much you have available. In fact, some debt managers say that if you’re using more than 50 percent of your available credit it can have a negative impact. On the other hand, if you close too many of your accounts, limiting your credit activities, you could suffer from having too little credit in the long run.

#5 Inquires into your credit report affect your ratings as well, but the effects are very some and in most cases negligible. Multiple inquires into your credit report for the purpose of a mortgage or auto loan will not affect your credit score. That’s because the FICO computing system was recently changed to protect the consumers from being penalized for seeking multiple, competitive interest rates on home or auto loans.  So several inquiries from auto dealerships or home mortgage companies in a 45-day period, are treated as a single inquiry.

Categories: cars loans
Tags: credit report, fico score