Things That Hurt Your Credit Score

 

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Having a decent credit score is very important to the financial well being of any person. Your credit score is taken into account if you try to obtain a credit card or loan. If you want to rent a residence, obtain a mortgage for a home, or lease or buy a car your credit score plays a part in determining if you will be approved. You may be approved with a lower score and be required to pay a hefty security deposit and much higher interest rates. Even car insurance companies use your credit score when determining your premium. The lower your credit score the higher your insurance premium. Some employers consider your credit score when they are determining if they should hire you as an employee.

There are quite a few things that can damage your credit score. It should be obvious that if you consistently pay late your score will be low. If you don’t pay your obligations at all that is even worse. If you have an account that is sent to a collection agency because you have failed to make payments it is reflected in your credit score.

If you default on a loan, if your home is foreclosed, if your car is reposed, if a creditor has a judgment against you – all of these issues really damage your credit score.

When computing your credit score the rating companies take into account the ratio of the credit used and the credit limit total available to you. If you are using a large percentage of the credit available to you it will lower your score (even if you are paying your bills on time each month). Maxing out your credit cards or going over their limits will have a negative impact on your credit score.

If you close a credit card it will show you have a lower total credit amount available to you. Depending on the total of your outstanding balances it may damage your credit score since the ratio of credit utilized to total credit available will be changed.

Applying for too many lines of credit in a short timeframe where the creditor runs a hard inquiry with the credit bureau can damage your score. It’s best to only apply for credit when you actually need it.

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If you are making a major furniture or appliance purchase you may not want to finance it through the store. The financing by some stores may indicate to the credit bureau that you are a credit risk.

If you pay for a rental car using your debit card the car rental company may pull a hard inquiry on your credit from the credit bureau and this may lower your score a few points.

If you have a credit card with a zero balance and haven’t used the card for a long time the credit card issuer may close that account. This lowers your total credit available and will increase the debt to credit limit ratio. Sometimes it’s best to make a small purchase on a dormant card at least once a year and then pay the balance off. This way the account will remain open.

You don’t want to close credit accounts you have had for many years. The longer period of time you have had the credit the better your score.

It may seem strange, but not paying parking tickets can damage your credit score. Many municipalities now are sending unpaid parking tickets to collection agencies to try and obtain payments. Utility companies may also refer unpaid bills to collection agencies.

It is in your best interest to keep on top of your credit obligations and to be aware of and avoid things that will have a negative impact on your credit score.