Alexandria, Lorton, Woodbridge Virginia Real Estate: Credit Scores in the Toilet? Avoid These 5 Common Mistakes Made by Consumers!

With the recent decline in the economy, many consumers are struggling to find ways to improve their credit scores. Not only is it important to know"what-to-do" to improve your credit, it is also important to know "what-not-to-do." Here are 5 common mistakes you should avoid when working to improve your credit score.

Mistake 1. Paying off old collection accounts. Paying off an old collection account seems like the right thing to do if you are trying to improve your credit score. However, this is not always the case! If a collection account has been inactive for more than six months, the severity of damage to your credit has already been done. Making a payment to the account would reactivate it, which could negatively impact your credit scores. This does not mean you should not pay off your past due accounts. It simply means you should "time" the receipt of payments so as not to further reduce your credit rating.

Mistake 2. Using a credit counseling service. Consumers frequently turn to credit counseling services for assistance. However, this can also have a negative impact on your credit score as it indicates your inability to manage your finances. It also highlights your inability to pay the full amount owed to your creditors.

Mistake 3. Canceling old credit cards. Your length of credit (credit history) accounts for 15% of your credit score. Canceling old credit cards would reduce your credit history, which would in turn reduce your credit score.

Mistake 4. Not using your credit cards at all. If you do not use your credit card for a period of six months or more, the account becomes inactive. Inactive accounts are not reported to the credit bureaus and do not contribute to your overall credit score. Therefore, it is better to maintain a small balance on your credit card than not use a credit card at all. At minimum, you should use this card once or twice every six months.

Mistake 5. Using a limited amount of credit and paying it in full within 30-days. When you charge an amount to your credit card and pay the balance in full each month, the creditor will not report the account to the credit bureaus. Although you consistently keep the account current by paying the balance before it is due, this particular card will not help to improve your credit score as it is not being reported to the credit bureaus.

If you are interested in buying or selling real estate in Alexandria, Lorton, Woodbridge or any of the surrounding areas in northern Virginia and Maryland, please contact me for assistance. My specializations include first-time home buyers, home sellers, luxury homes, short sales, foreclosures, relocation, and divorce.