A lot of people think that as long as you pay your bills, credit card debt, and other financial obligations on time, you will have an excellent credit score. Maintaining a clean credit history does not automatically translate to good credit scores. There are factors that you think might be harmless but in fact they may play a role in shaping your credit score:
You may well know that creditors will report to the credit bureaus when you skip payments for your mortgage, auto loans, or credit card bills but these are not the only things you need to worry about. Your local government may actually report to credit bureaus if you do not pay your taxes, library fines, or even parking tickets. They maybe small debts but they can still affect your credit score and influence decisions when you are applying for a loan.
No outstanding loans
When you have several credit cards but do not have a loan under your name, your credit score may actually suffer. Scoring systems of credit bureaus actually tend to favor consumers who know how to diversify. One’s credit score maybe better if you have a car loan, mortgage loan, and some credit cards rather than having a totally clean slate.
You may have made the best decisions and manage your debt well that you have a good cash flow allowing you to shop using cash. You avoid using your credit card since you do not want to have any more debt. Although this may sound as a wise move, it may actually hurt your credit score. Not using the plastic will cause a plateau on your credit score. Not using your cards for six months may prompt creditors to stop reporting them to the credit bureaus or cancel your account.