Unintentionally Lowering Your Credit Score: 4 Things to Be Aware Of

With interest rates showing a slight decrease and an atmosphere of increasing market stability, many people may be considering buying a home. When preparing to purchase a home and planning to obtain a mortgage loan, maintaining a high credit score is advantageous in various ways.

Today, let's explore four seemingly trivial actions that can negatively impact your credit score:

1.     Closing Old Credit Card Accounts

With the abundance of credit card products available nowadays, people often open new accounts with attractive benefits. Over time, unused cards may be closed. However, eliminating such accounts can significantly affect the Debt-to-Credit Utilization Ratio, a crucial factor for credit scores. This ratio represents the proportion of total debt to the total available credit. Keeping this ratio below 30% is beneficial for your credit score. Removing unused card accounts increases this ratio, adversely affecting your credit score.

2.     Opening New Credit Cards

Contrary to the belief that having more credit cards increases the available credit, it is not the case. Each time a new credit card account is opened, the credit score decreases by 5 points. While the number 5 may not seem substantial, it can have a significant impact, especially near the boundaries of credit score categories (e.g., between the good group - 700 to 759 - and the excellent group - 760+).

3.     Not Using Credit Cards

Having credit accounts for an extended period positively influences the credit score. However, not using credit cards for an extended period may lead the bank or credit card company to close the account, reducing the ownership period and negatively affecting the credit score.

4.     Co-signing

Co-signing is equivalent to taking out a loan directly. Moreover, since you cannot directly manage the repayment of this loan, co-signing is a risky behavior with significant consequences for your credit score. When considering co-signing, carefully reconsider the decision before proceeding.

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