Thanks for joining us here at Club Thrifty! We hope you had a wonderful Memorial Day Weekend! Today, we are proud to present our new contributor, Joshua Rodriguez. Enjoy!

Hey everyone, my name is Joshua Rodriguez and thank you for reading my first article here at Club Thrifty! One of the best ways to live a thrifty lifestyle is to build and maintain a good credit score. After all, with a good credit score, you can get lower interest rates on mortgages, auto loans and credit cards. The lower rates could save you hundreds or even thousands of dollars a year. However, before you can build or maintain good credit scores, you’re going to have to understand how they work. With that said, here are the 3 most commonly asked questions about credit scores and the best answers that I can give!

Question #1: Why Does Closing A Credit Card Harm My Credit Score?

Although, we find a lot of articles online that talk about things that may harm your credit score and, mention that closing a credit card account will harm your credit score, there is not much detail given as to why. This is because, it’s not exactly the truth! When we dig into factors involved in calculating your FICO score, there are 3 major factors at play here.

  • Debt To Credit Ratio – First, a big factor at play here is your debt to credit ratio. Therefore, if you have a good amount of available credit, closing the account will increase your ratio and harm your credit score. However, if you have no credit available, this is not the case for you!
  • Length Of Time The Account Has Been Open – The longer your average credit card has been open the better. With that said, if you apply for a store credit card to earn 10% off that purchase and never use it again, closing the card quickly will not effect your score negatively!
  • How Many Credit Cards You Have – Amount of revolving credit accounts also plays a pretty big role. If you have too many open accounts at once, closing one or two will improve your score.

Question #2: Can I Be Turned Down For A Job Because Of Bad Credit?

When you read about credit scores online, one thing that’s often mentioned is that you may be turned down for a high paying job if you have a bad credit score. I’ve received quite a few questions asking me if his is ethical and if this is legal. The answer is, YES! An employer has the right to turn down employment as a result of poor credit. On the ethics side, in my opinion, this is completely ethical! The truth is, many high paying jobs affect the lives of hundreds of thousands of people. If the person in charge of something so important can’t be trusted to pay debts back, they may not be able to be trusted in other areas of life.

Question #3: How Badly Does Credit Card Debt Settlement Effect Credit Scores?

I’d like to start this answer by saying that if you are thinking about credit card debt settlement programs, chances are, your credit score is the one thing that should be furthest from your mind. This is because the only people who should consider such a drastic option is someone who may be facing bankruptcy, foreclosure, ect.. That being said, credit card debt settlement programs have an extremely negative effect on credit scores. Once the program is complete, with an aggressive plan, it may take you 3 or 4 years to rebuild to good or excellent scores.