Your credit score is something that you should always be aware of since it is the one important number that lenders and creditors use to assess your credit worthiness. It is vital that you take good care of your credit standing because a good credit score can help you when you apply for an account, a loan or mortgage. In this post we’re featuring five ways you can damage your credit score. Read on so you can steer clear of them.
Failure To Pay On Time Or Missed Payments
Late or missed payments on your credit card or your loan can shave off a lot of points from your credit score. Your payment history accounts for a large percentage of your credit score so it is very crucial that you make your payments on time.
Missed or late payments appear in your credit report and any lender or creditor reviewing your credit report will see your entire credit history.
They can then use this to predict the likelihood of you missing payments or making late payments in the future. Needless to say, having missed or late payments in your credit history doesn’t really put you in a positive light.
Closing Accounts
You might think closing your account will help your credit score, but it doesn’t. If you close your credit card account it will eventually be removed from your credit report and with it, your credit history with that credit card account goes, too.
If you had a good payment history, closing your credit card account will also mean removing that good payment history from your credit report. Future lenders and creditors won’t be able to see your history and this may affect any application you have with them.
Closing your credit card account can also affect your utilization rate and this can lower your credit score. Utilization refers to the percentage of your credit limit that is being used. Removing one of your credit cards can change your utilization rate and in turn affect your credit score.
Opening Too Many New Accounts
Every time you apply for a new loan or a new credit card the financial institution checks your credit score. The check they run appears as a hard inquiry which, if done too often and too regularly, can easily damage your credit score. A hard inquiry remains on your credit score for two years and ten percent of your credit score is based on credit report inquiries. Why is this a bad thing? Because it implies that you are shopping around and trying to acquire too much credit at once.
And, worse yet, if you receive a number of new credit cards within a short period of time, and subsequently max them out, and are not able to immediately repay them, your credit score will drop because your debt load will be too high.
Having a High Credit Card Balance
Having a high credit card balance not only jacks up the interest on your account, but it also affects your credit rating. Over utilization can cause your credit score to fall.
Paying your bills on time, and paying as much as you can to lower your total balance can help keep your utilization down and raise your credit score.
Defaulting On A Loan
Defaulting on your loan can hurt your credit score in a really bad way.
It basically tells creditors and lenders that you failed to hold up your end of the agreement.
Although a negative report such as a default can stay on your credit report for a long time, it’s not impossible to rebuild your credit score. You can slowly but surely build up your credit score by making on-time payments, and maintaining a low balance on every loan or credit card you have.
