Your credit score is a huge part of your life. Yet, for something that is so important, it can be quite confusing. Here are some things about your credit score that may not be common sense to you.
30 Days Matters a Lot
You’ve likely heard that late credit card payments are a killer for your credit score. They are; but only if they’re 30 days late or more. As USA Today notes, if you pay your bill anywhere from one to 29 days late, it is considered on-time when it comes to credit. You might get charged a late fee, but this likely won’t hurt your credit score. However, if you pay your bill 30 days past its due date or later, your credit score could go down by up to 110 points.
Sometimes More is Better
One big chunk of your credit score is your credit utilization ratio — your total credit card balances divided by the credit limits. The lower that ratio, the better. Therefore, having more credit cards, and thus credit available to you, can actually help your credit score.
Paying Off a Loan Can Hurt
This might be the most puzzling part of credit scores. If you pay off a loan, it could hurt your score. There are two reasons for this. First, your credit history helps your score. The longer you’ve been paying off items on time, the better for your score. If you pay off a loan, especially one you’ve had for years, that account disappears from your file and you have less credit history. The other way paying off a loan can hurt your score is that maintaining a credit mix helps your score. It’s better to have loans and credit cards than just one or the other. If you pay off your loan, your mix suffers, and potentially your credit score.
Use the credit score simulator tool to see how these actions might impact your credit score and use that information to help you make smarter financial decisions.