Many people are in the dark about what makes their credit scores rise and fall.
That’s the takeaway from a new survey by the Consumer Federation of America and VantageScore Solutions, which found that consumer knowledge about credit scores is at the lowest level in the past eight years.
“Consumers know less about credit scores but think they know more,” said Stephen Brobeck, a senior fellow at the Consumer Federation of America.
The standard advice for a healthy credit score is to avoid paying your bills late or letting your balances get too high. Yet other moves — some seemingly positive — can actually lower your score, experts say.
Paying off an old debt
It seems like you’re doing something good: An old, unpaid bill resurfaces and you make a partial payment on it.
However, sometimes these debts are already so old they’re not legally enforceable, said Katherine Lucas McKay, who focuses on consumer debt at the Aspen Institute.
Once the debt collector makes a record of your active payments, it’s legal in many states for the debt to be treated as new, Lucas McKay said.
Often the easiest thing to do, she said, is to pay off the balance completely. “Your score will start to rise again once that record is closed,” she said.
If you believe the collection agency is acting inappropriately, file a public complaint through the Consumer Financial Protection Bureau. For the debt collectors, she said, it’s often easier to just resolve the issue “rather than have their regulator look into the situation.”
Sticking with one type of credit
Ten percent of your score is about the variety of your debt, said Matt Schulz, credit expert at CompareCards.com.
“If you’ve had a car loan, a personal loan, a credit card and a mortgage and handled them all well, you’re probably going to have a higher score than someone who has just had a credit card — all other things being equal,” Schulz said.
That’s because lenders have more data points to pull from to make their decisions.
You shouldn’t go out and get a loan you don’t want or need just to bump your score a bit, he said, but, “it is worth considering in some circumstances……..Read More>>