Do’s and Don’ts of maintaining a favorable credit score

Here are the do’s and don’ts of maintaining a favorable credit score, based on information at myfico.com, Fair Isaacs Corp.’s consumer-based Web site:

DO

Make payments on time and keep low balances on revolving credit accounts. “Generally, 50 percent or more of the maximum allowed on the account is considered a high balance,” said Fair Isaacs Corp. spokesman Craig Watts.

Eliminate cards from department stores, gasoline companies and other typically high-interest cards. “Cards issued by stores tend to have higher interest rates,” said Candy Wright of GreenPath Debt Solutions, a Michigan-based company with offices in Jericho and Hauppauge.

Consolidate but be sure terms are favorable. If you can transfer to a card with a low interest rate, that generally is good, Wright said. But Watts warned to do it with caution because transferring balances and closing accounts can have an adverse effect. “From a credit-reporting-bureau standpoint, all they can see is that someone has opened a new account and closed an old one. A lot of activity or a number of new accounts can hurt a credit score.”

DON’T

Don’t open too many new lines of credit. “Be the frugal farmer who distrusts bankers,” Watts said. “Shopping for new credit is part of the formula that brings down your score.”

Don’t apply for too many cards in a short time period. Every application shows up with FICO and “too many applications gets them nervous,” said Michael Kresh, an Islandia financial planner.

Don’t be a co-signer. If you take out a credit card with your child and they miss a payment, it shows up on your credit score, Kresh said.

Don’t take cash advances from one card to make payments on another. “That’s usually a big sign you need debt counseling,” Wright said. Plus, cash advances often have higher interest rates.

Don’t dismiss the rejection letter if you are denied credit. You are automatically entitled to a free credit report so you can see why you were turned down. Kresh advises you to check it out because incorrect information may be the culprit.

Don’t agree to a deal that seems too good to be true, like the offer of 15 percent off your purchases today if you sign up for their credit card. That’s one more application registered with FICO.

Source: myfico.com, Fair Isaacs Corp.’s consumer site

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