Know Your Credit Scores Before Making Big Purchases

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Many people work hard and save in anticipation of the day when they can make the dream of a new car or a new home come true. Some who realize that credit plays a major role in their purchase nevertheless choose to roll the dice at the time of purchase without knowing where their credit stands. Credit knowledge allows you to take a proactive approach and confirm your qualification status up front.

Some people believe that checking their personal credit reports will hurt their credit scores, but that’s simply incorrect. Checking your own credit is what the credit bureaus term a soft inquiry – it does not impact your credit score. It is a good idea to check your credit regularly, and especially before making a big purchase. Here are five tips to consider before you make your next big purchase:

1. Check your credit report for any new suspicious activity. 
According to a report by the Federal Trade Commission, five percent of consumers identify suspicious activity on their credit reports that could affect their credit scores. When negative suspicious activity on your credit report isn’t discovered quickly, it can significantly lower your credit scores, resulting in a higher interest rate or – even worse – a rejected loan application. Ensure that your reports contain exactly what you know to be your own activity.

2. Pay all your bills on time. 
An significant component of your credit scores is drawn from your payment history. Not paying your bills on time can cause a noticeable dip in your credit scores. It is imperative that you pay at least the minimum due on each credit account on or before the due date – it’s one of the best ways to show that you’re consistently using your credit responsibly.

3. Get current on any delinquent accounts.
As the saying goes, “life happens.” If you’ve fallen behind on a credit account, it’s vitally important to bring the account current before applying for new credit. When it comes to delinquencies, recent late or missed payments affect you more than old instances in some credit scoring models. It’s very difficult to be seen as a good candidate for more credit when you’re behind on account payments, so make sure your payments are current before scouting for a major purchase.

4. Keep your credit utilization low. 
Another major component of your credit scores is your credit utilization ratio, which is your outstanding balance in relation to your total available credit. It is a good rule of thumb to keep your ratio below 30 percent of your total credit limit. Doing so can positively impact your credit scores by showing lenders that you’re not trying to overspend your established limits while you seek additional sources of credit for the big buy.

5. Keep your old accounts open.
The length of your credit history is factored into many credit scoring models, so your old accounts may be doing more for you than you realize, even if you’re not using them. The longer that your positive payment history is, the better it can look to creditors who are trying to determine how long you’ve handled credit responsibly. Old open accounts can show creditors you have been savvy with your credit use for an extended period of time, which can make them feel more at ease.

Take these five tips to heart and you just may help your credit scores over time, and be in a better position when you make your next big purchase. Some say that the devil is in the details, but where your credit history and behaviors are concerned, paying close attention to the details may bring you bliss.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc., an Experian company. © 2015, Inc. All rights reserved.