Top 10 Things That Lower Your Credit Score
While there are people who stash their cash under their beds in shoeboxes and don't need credit for any purchases, most people will need to borrow money at some point. Getting money from a lender or bank can be a process that ranges from simple to nearly impossible. The single largest factor in borrowing money is your credit score.From getting a credit card to buying a car or house, your credit score affects nearly every aspect of your financial freedom. Having a good credit score can lower your mobile phone payments, get you a better offer on a vehicle trade-in, secure better interest rates on student loans, and help you qualify for a home or apartment. Keeping your credit score high is an important tool for future purchases and endeavors.
Your credit score is calculated from multiple sources and is a three-digit number representing your creditworthiness - that is, the likelihood that you can and will pay off any money you've borrowed. Unlike your first day of school, where you start with an A and just have to keep from losing it, your credit score builds over time and can drop quickly.
Below are the top ten factors that can lower your credit score and damage your financial trustworthiness.
An estimated 35% of your credit score is determined by whether you pay your bills on time or not.
"Collections" are third-party companies that get paid to collect unpaid debts. If you're late or refuse to pay your bills, you might end up getting some unwanted phone calls.
Filing for bankruptcy is like getting a black eye the day before a job interview. Nothing says you're untrustworthy like proving it in court.
If you've already borrowed all the money your credit cards will allow, it looks bad to the banks and credit companies. They will be hesitant to give you more.
This is when you've ducked out of paying your bills long enough that the court had to get involved to make you pay. Think about having your paycheck garnished and not having a say in where your money goes.
Having the bank repossess your home will raise all sorts of red flags to the credit bureaus that you can't be trusted with large investments.
15% of your credit score is determined by your credit history. Once you've started acquiring credit, leaving it running for a long time will look good. Shutting off your own credit looks bad.
If you're living within your means, then you really shouldn't need more than one credit card. Applying for multiples shows the banks and lenders that you plan to overstep your income.
Having only personal loans or only credit cards as your source of credit can hurt you in the long run. Just like playing the stock market, there's value in diversifying your credit type.
Paying late is one thing, but completely missing payments is even worse. When it comes to your debt, the old saying works best: Better late than never.
Unless you have Credit Karma! Get to know!