Does Moving a Lot Affect Your Credit Rating?

Credit scores are an important part of today's financial situation, and yet it can be difficult to get information on credit ratings, such as what actions affect your score positively and negatively. Moving frequently, due to job opportunities, marriage, school or other factors, can be a stressful event, not merely because of the hassle of packing but also from worry that multiple address changes will lower your score. Understanding the basics of the credit score system and clearing up some misunderstandings will help you as you prepare to move.

Significance

A credit rating is a three digit number that is used by lenders, credit card companies and other interested parties as an indicator of your creditworthiness. Also known as a FICO score, consumers should strive to achieve a number of at least 622, according to Beth Givens of the Privacy Rights Clearinghouse. Lower numbers than this can result in higher interest charges on credit cards and make it difficult to receive loans and mortgages.

Features

Credit ratings or scores are affected by many factors. Some of these factors include whether you pay your bills on time or not, whether your accounts accrue interest and other finance charges, how much of your credit line you are utilizing and how many credit cards, loans and other debt you are carrying. These factors are calculated and used to determine your overall credit risk, which is expressed by your credit score.

Inquiries

Inquiries by banks and other financial institutions are also used in calculating your score. Rental agencies may also request a copy of your credit score when evaluating your application. According to myFico, "Statistically, people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports." As a result, applying for many credit cards or several mortgages over the course of just a few years could have an impact on your credit rating, as it raises your credit risk.

Misconceptions

Misconceptions about credit rating scores abound. One of the most common is that cancelling unused credit card accounts will improve the score. Unfortunately, this may often lower a credit rating, especially if the cards were old accounts and infrequently utilized with little to no balance carrying over each month. An old account may not be useful for your day to day purchasing, but the age of the account shows a history of using credit, which can be beneficial to your score. In addition, several unused cards can keep your ratio of debt to available credit lower, and lowering your credit risk.

Address Changes

Address changes are less damaging to your credit rating than other financial actions, such as late payments. Changing addresses should not affect your credit rating in normal situations, provided that you are informing your creditors of your new residence. Failure to send change-of-address notifications could cause forwarded bills to arrive late, incurring fees and finance charges that can negatively affect your score. If you are changing residences frequently, also think carefully before applying for new credit cards (such as department store and other retail credit cards) in each new location, as this can lower your overall score.