There’s a right and a wrong way to do just about anything – including improving your credit score. Credit improvement mistakes hurt your credit score instead of helping it. Don’t make credit repair harder than it needs to be! Here are some things you should avoid when you’re improving your credit score.

Close credit cards

Closing a credit card will rarely boost your credit score. In fact, it’s more likely to slow down your credit repair progress since closing a credit card affects your credit utilization (which is 30% of your credit score). Leaving credit cards open will help boost your credit score, especially when any of your credit cards still has a balance.

Open new credit cards

When you open a new credit card, you lose points for three reasons: you’ve added another credit inquiry to your credit report (10% of your score), your average credit age is lowered (15% of your score), and your credit utilization goes up, assuming you make a new charge on the card. Opening a new credit card might only help you improve your credit score when your other credit cards are either closed or not in good standing.

Pay off high balances first

If your highest balances happen to have the highest interest rate, you might pay those off first to save money on interest. Knocking out those small balances will help your credit score in terms of credit utilization though. For example, if you have a credit card with a $250 balance and $500 credit limit versus a $500 balance and a $1000 limit, pay off the $250 credit card first. You’ll take that credit card to a 0% utilization sooner and bring your average utilization down to 33%.

Shuffle balances around use balance transfer deals

Transferring too many balances onto a single credit card raises your credit utilization and lowers your credit score. Not only that, if you open a new credit card to get a balance transfer deal, you’ll lose points because of the credit report inquiry and lower credit age. Apply for new balance transfer credit cards sparingly and don’t transfer more than 30% of the new card’s credit limit.

Overlook your credit report

If you want to improve your credit score, your credit report is the first place to start. After all, that’s the information used to generate your credit score. You can get a quick boost by disputing inaccurate, negative information that’s on your credit report. But, you’ll never know these errors are there if you don’t check your report.

The right way to improve your credit score

The best way to boost your credit score is to pay your bills on time. Pay off past due bills like charge-offs and debt collections since payment history is 35% of your credit score. Pay down your credit card balances to lower your credit utilization and raise your credit score. Remember that a higher credit score doesn’t come overnight. Keep paying your accounts, make reasonable credit card charges, and you’ll see your credit score increase over time.

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“Credit card rates have been going nowhere but up, and in the wake of the Credit Card Act they are likely continue to rise along with balance transfer and annual fees as credit card companies scramble to make up for income they were generating from egregious practices,”” said Chris Larsen, Chief Executive Officer and Co-founder of Prosper. But there are a few things to watch out for if you’re considering a debt consolidation loan.

• It may not be simple and easy. If you’re searching for a debt consolidation loan chances are you have missed some payments and are behind on a bill or two. But beware of rushing through the process of loan consolidation. You may be lured in by promises of quick money, but in actuality you’ll be paying higher interest rates than you expected.
• Beware of low introductory rates. You may be enticed by a deal that promises a low introductory rate, only to hike it up a few months down the road. Make sure you know exactly what you’re getting into.
• Negotiate better terms. You can negotiate and you should always try. You never know what better rate you may get if you ask.

Financial expert Jean Chatzky says there are pros and cons to debt consolidation that you should consider before signing on the dotted line. “One advantage to debt consolidation is that it gives you the convenience of paying one creditor each month instead of many,” she writes. Jean also says, ” Be careful. The danger is you can easily find yourself falling even deeper into debt. Basically, the loan will open up lines of credit that have been closed. Now that they’re open, you may be tempted to resume poor spending habits.” And because you’re only making one debt payment a month you may have the misconception that you’re handling your money better than you really are, she says.

If you’re still wondering whether debt consolidation is right for you, check out this Debt Consolidation Calculator from MSN Money. Put in details such as how much you want to pay a month, what your current debt payments are and if there are any fees for opening the debt consolidation. You’ll have a better idea if it’s a good move for your financial situation.

More Americans Turning To Debt Consolidation is a post from: Thistle Debt Consolidation