With so many credit card and line of credit offers, many people probably have a few of them. However, many of them use only one or two credit cards and forget about the rest.
Although it is a good idea to have some excess credit in case of a financial emergency, having too much excess credit can make you a higher risk to lenders. This is because you have a higher chance of overextending your credit.
In addition, having lots of accounts you don't use increases the fees you have to pay to maintain them. You should consider keeping only those accounts you use frequently and close the other accounts that have no outstanding balance. Having fewer accounts will make it easier for you to keep track of your debts.
However, closing any credit account can cause your credit score to fall in the short term. This is because you will have higher credit balances spread out over a smaller overall credit account base. This should not be an issue if you are not going to apply for loans in the short term. With less credit, you will be less likely to go into more debt. As you continue to pay down your debt, your credit score will improve in the long run.
2) Excessive inquiries on your credit report.
Every time a lender looks at your credit report, the inquiry is noted in your credit report. If you have a lot of inquiries on your report, it may appear that you are either shopping for several loans at once or you have been rejected by many other lenders.
In either case, the impression you give to lenders are not good and they perceive you as having a higher credit risk. This in turn will affect your credit score.
If you are shopping for a loan, shop around within a short period of time like within a few days.Inquiries made within a few days of each other will generally be lumped together and counted as one inquiry.
Another way to cut down on the number of inquiries on your account is to do more thorough research first before approaching the lenders. Short listed a few that interest you and then approach the them only. This will reduce the number of lenders accessing your credit report at the same time, which can help save your credit score.
These little mistakes will cause the credit score to drop gradually. If left unnoticed, the credit score will drop to into the red zone and you will have to spend considerable time and effort to nurse it back to health.
