I’m about to say something that flies in the face of a lot of personal finance advice that you’ve probably received in the last few years. If you have a lot of unused credit accounts, you might be itching to close them all. However, this is not healthy for your score at all. The truth about credit is that the older you have an account, the better your score is. When you think about it, it actually makes sense. The oldest accounts you have would naturally have the most activity on them. If it’s good activity, as in you’ve been paying everything on time, then there’s really no reason to get rid of it. As long as you can focus on the future ahead of you, you can get even better credit.
But if you close off the past in the world of finance, lenders only have this new information. And if you’ve missed payments now, you’re in for trouble. You are a lot better off keeping these accounts open.
Now, at this point you’ll probably protest because you aren’t using them. Why is that? If you’re trying to watch your finances, you’re not alone. Some people feel that it’s better to keep credit out of sight, but I’ve never subscribed to this attitude. Credit is there to help you. If you don’t have any big long term plans, then you might not care about credit. But even applying for a bank loan for a small amount will ask you to get a copy of your credit report. Just about anything you can think of in the finance world will ask for a look at your credit reference file. Getting rid of an old account is cutting off a piece of your future good. If you really can’t control yourself, you might let it go, but I would definitely reconsider this course of action.
From here, it’s up to you. You can close the account, or you can make small charges on the accounts. We’re talking about having a utilization of about 15%. On a thousand pound credit limit, that’s only one hundred and fifty pounds. That’s not too bad, is it?
As long as you stay focused, there’s no real reason why you can’t get things done in a big way. Are you ready to move forward? No problem.
If you want to get new information on there, the only way to do that is to get new credit lines. You might go with a mobile phone that has a regular monthly plan, or you might want to go with a credit card that has a small limit. It’s completely up to you to figure out which direction that you’re going to go.
If you’re not monitoring your credit at least occasionally, you could be in for trouble. Do you save those credit rejection letters? If so, you can write to the company and ask for a company of the credit file that they pulled in order to evaluate you. It’s a fair and transparent way of seeing what your credit was like when you applied. If there are errors, you can get them corrected right away.
I think that credit is something that should be embraced by all people, not just when you think you need it. You just never know which direction that life is going to take you, so it never hurts to have good credit. Did you know that your credit gets pulled when you apply for a job? It’s true. There are cases where they check your credit before making the decision to hire you. This is a legal procedure, and if you don’t agree to it they can decide not to consider you for employment. Just give it a try, you really have no idea where you’re going to end up in the credit journey.