Tip #13: Be careful of online loan rate
Online loan rate quotes are easy to get - type in some
personal information and you can get a quote on your car loan,
personal loan, student loan, or mortgage in seconds. This
is free and convenient, leading many people to compare several
companies at once in order to make sure that they get the best
The problem is that since online quotes are a fairly recent
phenomenon, credit bureaus count each such quote estimate as an
“inquiry.” This means that if you compare too many
companies online by asking for quotes, your credit score will
fall due to too many “inquiries.”
This does not mean that you shouldn’t seek online quotes for
loans - not at all. In fact, online loan quotes are a
great resource that can help you get the very best rates on
your next loan. What this information does mean, however,
is that you should research companies and narrow down possible
lenders to just a few before making inquiries. This will
help ensure that the number of inquires on your credit report
is small - and your credit rating will stay in good shape.
Tip #14: Don’t make the mistake of thinking
that you only have one credit report.
Most people speak of having a “credit score” when in fact
most people have at least three or more scores - and these
scores can vary widely. There are three major credit
bureaus in the country that develop credit reports and
calculate credit scores. There are also a number of
smaller credit bureau companies.
Plus, some larger lenders calculate their own credit risk
scores based on information in your credit report. When
repairing your credit score, then, you should not focus on one
number - at the very least, you need to contact the three major
credit bureaus and work on repairing the three credit scores
Tip #15: Don’t make the mistake of closing
lots of credit accounts just to improve your score.
This seems like a contradiction, but it really is not.
Many people think that to improve their credit score, they just
have to pay off some debts and close their accounts. This
is not exactly accurate. There are several reasons to
think carefully before closing your accounts.
First, if you close an account you need (for example, if you
close all your credit card accounts) then you will have to
reapply for credit, and all those inquiries from lenders will
cause your credit score to actually drop.
Secondly, most credit bureaus give high favorable points to
those who have a good long-term credit history. That
means that closing the credit card account you have had since
college may actually hurt you in the long run. If you
have credit accounts that you don’t use or if you have too many
credit lines, then by all means pay off some and close
them. Doing so may help your credit score - but only if
you don’t close long-term accounts you need. In general,
close the most recent accounts first and only when you are sure
you will not need that credit in the near future. Closing your
accounts is a bad idea if:
1) You will be applying for a loan soon. The closing
of your accounts will make your credit score drop in the short
term and will not allow you to qualify for good loan rates.
2) Closing your accounts will make your overall debt balance
too high. If you owe $10 000 now and closing some
accounts would leave you with only $1000 of possible credit,
you are close to maxing out your credit - which gives you a bad
In the short term, closing accounts will lower your credit
score, but in the long run it can be beneficial.