The Top Ten Actions That Can Hurt Your Credit Score

April 3, 2010

In a nutshell, your credit score represents your financial grade so to talk. It basically shows how well you have managed your credit. This magic number is how creditors and lenders decide if you’re worthy to receive credit or a loan. Here is a list of the top ten actions that can lower your credit score.

1. Paying your creditors late
Thirty-five percent of your credit score is your payment history. Consistently being late on your credit card payments will drop your credit score. Pay your credit card bills on time to preserve your credit score.

2. Not paying your creditors at all
Totally ignoring your credit cards bills is much worse than paying late. Each month you miss a credit card payment, you are one month closer to having the account charged off.

3. Having an account charged off
When creditors think you are not going to pay your credit card bills at all, they charge off your account. This is one of the worst things for your credit score.

4. Having an account sent to collections
Creditors often use third-party debt collectors to try to collect payment from you. Creditors might send your account to collections before or after charging it off. A collection status shows that the creditor gave up trying to get payment from you and hired someone else to do it. This is even worse than having the account charged off.

5. Defaulting on a loan
Defaulting on a loan is similar to credit card charge-offs. A default shows that you have not fulfilled your end of the loan contract.

6. Filing bankruptcy
Bankruptcy will absolutely ruin your credit score. Try to seek alternatives, like consumer credit counseling, before filing bankruptcy.

7. A foreclosure
Getting behind on your mortgage payments will cause your lender to foreclose on your home. In turn, the late payments will injured your credit score and make it harder if not impossible to get approved for future mortgage loans.

8. Getting a judgment
A judgment shows you not only avoided your bills, the court had to get involved to make you pay the debt. While they both lower your credit score, a paid judgment is superior than an unpaid one.

9. High credit card balances
The second most important part of your credit score is level of debt, measured by credit utilization. Having high credit card balances (relative to your credit limit) increases your credit utilization and decreases your credit score.

10. Having credit cards that are maxed out
Maxed out and over-the-limit credit card balances make your credit utilization 100%. This is least best for your credit score.

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