Every monetary decision you make can affect your credit score, positively or negatively. Knowing which actions hurt your credit score can help you make intelligent choices. Here are ten ways to destroy your credit score to avoid.
Miss Payments
Making payments late or missing them altogether is one of the quickest ways to lower your credit score. Even if you are only a few days late, this delay will appear on your credit report and hurt your score. To avoid this, always pay your bills on time, and consider setting up automatic payments.
Take on Too Much Debt
Debt is not always bad, but carrying too much debt ruins your credit score. Credit rating companies compare your total debt to the amount of available credit you have. The key is to manage your debts responsibly and avoid taking on more than you can handle.
Max Out Your Credit Cards
When you use all of your available credit, it indicates to the lenders that you are not good at managing your money. This report can have a severe impact on your credit score. Avoid maxing out your cards by keeping your balance below 30% of your available credit limit. Also, regularly pay off balances to help you avoid this problem.
Neglect Your Credit Report
Neglecting to check your credit report is a mistake that can cost you. Check your credit report as often as possible to ensure there are no incorrect entries or signs of fraud. You can get free annual credit reports online from all three bureaus, and it’s wise to check them at least twice yearly for accuracy.
Stop Using Your Cards
If you stop using your credit cards, it may seem like an excellent way to save money, but it can bring down your credit score. Credit rating companies look at how often and how much you use your cards to indicate how responsible you are with debt. Try to keep using the card for small purchases and pay off the balance each month.
Open Too Many Credit Cards
Having a lot of credit cards can make it challenging to keep track of your finances, and too many open cards will diminish your credit score. Applying for too much credit at once also raises red flags with lenders. Sticking with one or two cards and using them responsibly is best.
Make Late Payments on Your Mortgage
Missing a mortgage payment can majorly impact your credit score, so stay current with your payments. If you find yourself in a position where you cannot make a payment on time or at all, contact your lender immediately for help.
Close an Unused Credit Card
Closing an unused credit card might seem like a good idea, but it could lessen your score. Credit rating companies factor in the time you’ve had accounts open when determining your score. If you must close an account, keep the oldest cards open and use them occasionally.
Fall Behind on Tax Payments
Falling behind on your taxes has serious consequences. You will be fined, and the IRS will report unpaid taxes to the credit bureaus; this can significantly reduce your score. Also, if you owe more than $10,000 in back taxes, the federal government can take legal action against you. Ensure to pay all taxes due promptly to avoid this situation.
Co-sign on Someone’s Credit Card
Co-signing is a decision that should not be taken lightly, as it can seriously affect your credit score. If the other person fails to pay their bill, you will be held financially liable for the debt, which will lower your score. Always think twice before signing on to someone else’s loan or credit card agreement, and ensure the other person is responsible with money before agreeing to co-sign.
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