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Thursday, February 21, 2008

15 Credit Score Killers

15 Things That Hurt Your Credit Score
by LaToya Irby

Your credit score is an important number. It's how creditor and lenders quickly decide if you are creditworthy. Find out which actions hurt your credit score so you can stay away from them.

Paying lateThirty-five percent of your credit score is your payment history. Consistently being late on your credit card payments will hurt your credit score. Pay your credit card bills on time to preserve your credit score.
The Effects of Late Credit Card Payments

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

Having an account charged offWhen creditors think you're not going to pay your credit card bills at all, they charge off your account. This account status is one of the worst things for your credit score.
How To Avoid a Charge-Off

4. Having an account sent to collectionsCreditors 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.

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

Filing bankruptcyBankruptcy will devastate your credit score. It's a good idea to seek alternatives, like consumer credit counseling, before filing bankruptcy.
Basic Types of Bankruptcy

7. Having your home foreclosedGetting behind on your mortgage payments will lead your lender to foreclose on your home. In turn, the late payments will hurt your credit score and make it harder to get approved for future mortgage loans.

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

9. High credit card balancesThe 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. Maxed out credit cardsMaxed out and over-the-limit credit card balances make your credit utilization 100%. This is least ideal for your credit score.

Your credit score is an important number. It's how creditor and lenders quickly decide if you are creditworthy. Find out which actions hurt your credit score so you can stay away from them.

Closing credit cards that still have balancesWhen you close a credit card that still has a balance, your credit limit drops to $0 while your balance remains. This makes it look like you've maxed out your credit card, causing your score to drop.
Five Credit Cards You Should Never Close

12. Closing old credit cardsAnother component of your credit score, 15%, is the length of your credit history - longer credit histories are better. Closing old credit cards, especially your oldest card, makes your credit history seem shorter than it really is.

13. Closing cards with available creditIf you have several credit cards some with balances and some without, closing those credit cards without balances increases your credit utilization.

Applying for several credit cards or loansCredit inquiries account for 10% of your credit score. Making several credit or loan applications within a short period of time will cause your credit score to drop. Keep applications to a minimum.
Credit Inquiries and Your Credit Score

15. Having only credit cards or only loansMix of credit is 10% of your credit. When you have only one type of credit account, either loans or credit cards, your credit score could be affected. This factor mostly comes into play when you don't have much other credit information in your credit history.


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