Explain how would the following behaviors affect FICO score:
A. Open a new retail account whenever there is a small incentive such as free t-shirt
B. Maximize credit account limit in each billing cycle
C. Keep large account balances and moving them around different credit cards.
D. Using credit card instead of car loan to buy used cars.
E. Often forget to make credit card payments and ignore collection phone calls.
A: Opening a bunch of new accounts in a short period of time indicates risk and lowers score
B: Might have lower score since FICO considers the ratio of money owed to the amount of credit available
C: Having a lot of debt and large balance does not necessarily equate to low credit scores as long as within credit limits and regular payments are made
D: Might lower the score since high credit scores need a strong mix of retail accounts, credit cards, car loans and mortgages
E: Any late or missed payments will negatively impact the score
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