Everyone is learning that the better your credit score is the better your interest rate will be, saving you thousands of dollars every year in interest. Did you know that insurance companies also check your credit and often times companies that give you quotes on your insurance are doing so based on your credit scores.
Some things you do however may hurt your score instead of helping your score.Take the issue of closing down credit cards. It used to be if you had open credit cards with a lot of money available that the unused money would hurt your score, so, many folks will close down accounts they don't use often. The truth of the matter is before you close down an account check on how long you have had the account. A credit card with a long history where you have used it, paid it off, or use it and pay it off regularly will give you a higher rating from the history you have with that card, than one you have had for just a few months and little history. So if you cancel the long standing card and only have a newer card to show the history your credit scores will take a drop, sometimes as much as 87 points. Major credit cards will have a larger impact on your credit than dept. cards.
Sometimes you don't have a choice in closing an account, if you have one that is rarely used, you possible may have your credit line reduced or closed by the credit card company without your appoval. This will affect your credit score as much as if you had cancelled the card yourself.
Consumer credit scores are made up of five components; 1) payment history, 35% 2) amount owed 30% 3) length of credit history 15% 4) new credit 10% , this also includes recent inquiries, and 5) types of credit used 10%, mortgages are the strongest, but they check the credit card and retail to view the payment history.
The more educated and informed you become on how your credit works will benefit you and help you to optimize your credit profile.