How your credit score is affected by common activities

Published 12:00 am Monday, October 29, 2012

(BPT) – Managing money wisely: It’s something that everyone is told to do from an early age. From putting pennies in the piggy bank to classroom instruction in how to balance a check book, the message is to spend and save thoughtfully. However, in the real world, those lessons often fall by the wayside due to crunched schedules, unexpected expenses and simple forgetfulness. However, the way you handle – or mishandle – your money from day to day will have an impact on your credit score.

While many people only see their credit scores with their free annual check, a recent white paper by credit score model company VantageScore Solutions points out that roughly 70 percent of credit scores fluctuate by as much as 20 points in a 90-day period. Whether it goes up or down depends on your behaviors.

“When it comes to credit scoring, there are two questions that are most commonly asked by consumers yet rarely understood. These questions are ‘why did my credit score change,’ and, ‘how can I improve my credit score,’” says Barrett Burns, president and CEO of VantageScore Solutions. “We’re providing answers to those questions and more, including specifics for how certain profiles of consumers are impacted by common credit activities, and how to further improve their scores or repair a damaged credit profile.”

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Consider these common behaviors and how they’ll affect your score:

* Paying a bill late for the first time: Missing that due date will likely cause your score to drop. Try signing up for auto-pay to make sure your bills are paid on time.

* Maxing out your credit card: When you are at or near the limit on your credit card, you’ll see a drop in your score. By paying off your balance monthly, as is commonly advised, you can avoid the problem.

* Inquiring about a new loan: This common activity can cause a small drop in your credit score. Credit rating agencies might be uncertain of why you need the added credit exposure. You can show them that it’s simply a normal expansion by making payments on time, which will also help rectify the minor drop in your score.

* Closing an account: You might want to think twice if you think closing an account is a good way to keep yourself from getting in credit trouble. Closing an account can actually cause a minor drop in your score, while scores get a boost if you have a long credit history with an account.

How long-lasting the effects of a drop might be depends on the severity of the problem. The minimal drop associated with things like obtaining new credit or closing an account can be righted within roughly three months – as long as you’re being otherwise financially responsible. However, a more major drop, like a missed payment or default, can last for nearly two years, and the biggest drop, caused by bankruptcy, can affect your score for seven years. There are many other everyday activities that can impact your score, and the Consumer Federation of America offers more ways to learn about them at

Keeping your credit score healthy will have lasting effects on your financial future, so it pays to be attentive each day. A slip-up here and there can make a real difference, and it’s more challenging to raise your score than it is to lower it. Manage your most basic financial activities carefully and you’ll see positive results in your score.