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<\/span><\/p>\n1. Settling past-due debts with a creditor to pay less than you owe<\/strong>.<\/span><\/p>\n Anyone who has amassed enough credit card debt has gotten the pitches in the mail, and sleepless fretting debtors see the ads on late-night TV: Pay Down Your Debt! It always sounds too good to be true and it is.<\/p>\n \u201cEven though you’re getting rid of bad debt, it stays on your report as ‘settled’ rather than ‘paid off,’ and is now updated on the payment date, making it look like it happened more recently than the original loan. Your credit score is weighted more heavily toward recent events than past events, so taking a bad debt from the past and moving it to the present will count against you.\u201d<\/p>\n 2. Transferring balances from a high-interest account to a low-interest account.<\/strong><\/span><\/p>\n Ahh, the old trick of debt-juggling from card to card. You get an offer for a new card with an enticing 0% annual percentage rate for a whole year. Who knows what might happen in that interest-free year\u2014you could even pay off this debt for good, right?<\/p>\n Balance transfers can seem like a good idea at the time,\u00a0\u201cWhile it’s better for your bottom line, opening new accounts works against your credit score. Plus moving all your debts to one card could negatively impact your credit utilization (your ratio of debt to available credit).\u201d<\/p>\n 3. Closing old credit cards<\/strong>.<\/span><\/p>\n One school of thought holds that the more credit you have open, the more risk that it could be misused, or it could leave you more vulnerable to fraud, so you should close your unused cards. But closing cards hurts you two ways,\u00a0by increasing your debt utilization and shortening your credit history length. \u201cCreditors like to see that you have a lot of unused, available credit, and that you have accounts that have been open for a long time without problems.\u201d<\/p>\n 4. Paying off your car or your mortgage.<\/strong><\/span><\/p>\n What? Paying off your mortgage can work against<\/em> you?\u00a0\u201cFICO reports that 10 percent of your credit score is determined by your \u2018credit mix,\u2019 and they like to see a variety of installment and revolving loans. If all you have is an auto loan and three credit cards, paying off the car will leave you with nothing but revolving credit.\u201d However,\u00a0in that case you might want to focus on paying off that debt.<\/p>\n 5. Avoiding debt altogether won’t help you.<\/strong><\/span><\/p>\n So basically, no matter what, you\u2019re doomed! (Kidding. See the conclusion below for a glimmer of hope.) \u201cWhile eschewing debt is in vogue these days, your credit score is based on how well you can handle credit, and all of your score’s components are based on you having open debt accounts,\u201d\u00a0That means that even if you are anti-credit cards, well-managed credit accounts will eventually help your case if you plan on getting a mortgage.<\/p>\n It may now seem like credit scores are a hopeless \u201cdamned if you do and damned if you don\u2019t\u201d situation. But there are ideals you can strive for to achieve a good credit rating.\u00a0Therefore, it’s pretty difficult to get penalized for having too many accounts.\u00a0Here are some good parameters to work with to ensure your credit scores will always be as high as possible.<\/p>\n<\/span><\/p>\n
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