12 Credit Score Killers
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So you want good credit, here is the place to begin. Creditors, insurance companies and perspective employers review your credit to get to know you better. Make sure it puts you in the best possible light.
Bankruptcy
Bankruptcy is like dropping an atom bomb on your credit report. There are alternatives to bankruptcy. Get some good debt management counseling. There are ways to get your bills paid and get out of debt. There are a lot of advocates of consumer credit counseling. Be careful this can be almost as bad as bankruptcy. Check out debt free counseling
Judgment
A judgment on your credit report is very harmful to your credit score but a paid judgment is less so. If you have a judgment pay it off. If you are being taken to court try to negotiate.
Foreclosure
A foreclosure on your credit report is not just a negative check mark it is a very black bold negative check mark. Late payments on your mortgage decrease your score but the foreclosure that it can lead to continues the downward spiral. The decreased score will lessen your chances for a future mortgage but the foreclosure alone will stop many leaders from loaning to you until it is paid in full or drops of your report.
Defaulting on a loan
Though not as negative as a foreclosure you want to avoid this. This shows up as not keeping your word.
Charge off account
When you have not paid on your credit card bills for 180 days they can be charged off. This is basically a statement by the credit card company that they believe that you are not going to pay your bill. This can be very devastating to your credit. If unable to pay in full negotiate some payment.
Collections account
An account can go to collections before or after it was charged off. This is the status that an account has when the creditor has hired someone to collect payment for them.
Non payment
Your report shows the number of days or months you are late on your payments. Not paying will bring you to a charge off.
Late payments
The credit bureaus track your payment history and it plays a major role in your total score. Pay your bills on time but if unable to pay the full amount on all of them negotiate and prioritize. Having a credit card account closed is not as bad as having your house foreclosed on.
High balances
Credit utilization is almost as important as payment history. Having balances that are close to your limit will lower your score. It is not wise to lower your credit limits just because you don’t use it. That will negatively impact your score. There are 2 ways to improve this part of your score. Pay down your balances or increase your credit limits. Having maxed out credit cards or over the limit cards is very harmful because it shows that you have no available credit.
Closing credit cards
If you close your card while you still have a balance it drops your available credit, thereby dropping your score. This is the same for closing old cards with available credit. Closing out old cards will also lower your score because length of credit history is 15% of your score.
Only one form of credit
Having a mix of types of credit accounts for 10% of your credit score. This will have more weight the less credit you have.
Inquiries
Keep applications for credit to a minimum. Credit inquiries have the same amount of impact on your score as does your credit mix. Keep inquiries few and far between.
Next Step: What is a Charge Off
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- What is a Charge Off
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- How to Repair a Bad Credit Report
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25 June 2008, 11:36 am
You should not that inquiries come in two types, hard and soft. Soft have no affect and include when you check your own credit and when potential creditors get a copy of your report to see if they should send you an offer. Hard inquiries happen when you actually apply for credit, insurance, ect.