What Can Hurt Your Score - And What Can Help It

Credit scores are dynamic, meaning they change all the time. A bank lender checking your credit rating may come up with a completely different score than an auto loan company who checks your report 15 minutes later. That's because bill payment information is coming into the credit rating agencies all the time, impacting your score one way or another.

What can lower your score?

Repeated inquiries: Each time you apply for credit and a credit grantor requests your credit report, a few points may be deducted on the theory that you are adding to your potential monthly obligations.

Will your score decline if you, or your lender, repeatedly check your credit rating? If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called "inquiries") will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

Pre-approved credit cards: If you have a history of accepting pre-approved credit cards, your credit score may be lowered on the theory that too many cards equal too much debt. A person with one credit card is going to score much higher than a person with six credit cards because, in theory, the former has much less debt than the latter.

Late or No Payments: Any college graduate can tell you that being late just one payment on a college loan - or worse, not paying the bill at all - can cost you your first home. Lenders take bill payment seriously. If you're habitually late paying one bill, they take the position that you'll be late paying their loan, too.

How to Improve Your Score

In general, late payments will lower your score, but having a good record of making payments on time will raise your score. So the obvious place to start improving your credit score (after obtaining a copy of your credit report from Equifax or Trans Union for example) is to ensure that all your bills are paid on time.

Besides paying your bills on time, don't let your credit card and revolving balances get too high. Even if you pay the bare minimum on your Visa card a potential lender may see your high level of revolving card debt and assume you can't keep up with your financial obligations.

Also check your credit reports for errors. The fact that you ultimately paid off your college loan may be lost in a sea of bureaucratic paperwork that the credit rating agency never sees. So check and see that all the data on your credit report is accurate.

One quick way to do that is to check the three major credit report companies: Equifax (www.equifax.com), Experian (www.experian.com), and Trans Union Credit Bureau (www.transunion.com). Each provides your credit rating report as well as handling stolen card and fraud complaints.

One you get your credit report be sure all the accounts listed on the report are actually your own and dispute negative information if it is wrong. And if positive information is missing, insist that your creditors report it.

Above all, take nothing for granted. Your financial future may be riding on your credit score.

Correcting Credit Report Mistakes