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Keeping Credit Cards Could Help Your Credit Score

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Sep 21, 2009 5:45 pm US/Eastern

Keeping Credit Cards Could Help Your Credit Score

LINK: Consumer Reports: Protect Your Credit Score

PITTSBURGH (KDKA) ― If you're being battered by the economy, you may be worried about your credit score. 

It can affect everything from your ability to borrow money to getting a new job.  

Consumer Reports Money Advisory has some important information on how to protect your credit score in this volatile economy.

If you hope to improve your credit score by cutting up your credit cards, think again.

"Canceling your credit card can actually hurt your credit score because you give up the available credit on that card. And available, unused credit is one of the key components of your credit score," Greg Daugherty, from Consumer Reports, said.

One of the most effective ways to improve your credit score is to pay down balances on your credit cards.

"Don't stop using your cards completely. Using a card and keeping up with your payments can be good for your score," he said.

Second, be careful applying for loans. Too many loan applications in too short a time can hurt your score, especially if they are rejected.

"Apply for credit in person and ask the loan officer if you qualify before submitting a loan application," Daugherty said. "If you're going to be rejected, go elsewhere."

Third, if you're drowning in unpaid bills, seeking debt relief is good. But think twice about entering into a partial payment agreement.

"New creditors don't like to see old creditors getting only a partial payment," noted Daugherty.

Partial payment, though, is better than nothing. Don't miss payments on any bills, including those you may consider "less important."

Any bill of $100 or more that goes to a collection agency shoots a hole in your credit rating.

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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