We’ve been around the credit score block a few times now, giving you tips and tricks to maintain and repair your credit score through every stage of life. But truly taking ownership of your finances means understanding your downfalls, pain points and areas of improvement – and today we are here for a little tough love. Today we will explore what is negatively impacting your credit score, referencing some of our previous posts as tools to face them head-on.
1. You don’t pay bills on time.
We are firm believers in living life to the fullest and we understand that emergencies happen – but the quickest downfall for any credit score is late payments. Whether you miscalculated your monthly budget, lost track of the date or had a significant life change – late payments happen to all of us, but what is important is how you prepare yourself for it to never happen again. With payment history making up 35% of your score, keeping your payment history up-to-date is vital to a healthy credit score, so managing your payment is the best thing you can do to make sure you pay every bill on time.
Check out our best tips to get every bill paid on time here: 4 Tips to Make Timely Payments
2. You file for bankruptcy or foreclosure
Depending on the type of bankruptcy you file for, it could affect your credit score for up to 10 years. Filing for bankruptcy is essentially breaking the agreement you made with lenders, stating that you can no longer hold up your end of the deal. For future potential lenders and loaners looking at your credit score, this can greatly affect their willingness to give you the money or asset you are requesting. Truly, the only way to avoid the affects of a bankruptcy or a foreclosure is to do whatever you can to avoid one itself. This means money and credit management: paying your bills on time, not letting debt rack up and paying the minimum amount or more (our preference) when the time comes.
Our best tips – check them out: 4 Tips to Manage Your Credit
3. You applied for too many credit accounts.
Opening lines of credit is great for building your score, but opening too many at once can slowly take a toll on your score. Every time a hard inquiry is made, like when you apply for a mortgage, loan or credit card, a few points are deducted from your score. Although these fall off after two years, applying for too many lines of credit at once can knock your score down – affecting you long term. Applying for too many credit accounts can also make managing your credit difficult as you try to keep up with bills across many different accounts. Things like calendars, alerts and auto-payments are great ways to help simplify it all, but being defensive is always the best offense when it comes to keeping a healthy score.
Here are Five Factors that Affect Your Credit Score and how to tackle each in depth:
4. You carry high balances on your credit cards.
Unfortunately, carrying high balances on your credit cards tells lenders one thing – you are slow to pay back debt. With your payment history making up a huge chunk of your credit score and exceeding your credit limit having the potential to take a huge hit on your score – keeping lofty balances can be detrimental to an otherwise healthy score. Direct tactics like keeping your credit utilization under 20% and always paying at least the minimum of your credit card bill every month are no-brainers when it comes to keeping balances on your credit cards manageable.
For more tactics on managing credit utilization, this is definitely our go-to: 4 Tips to Manage Your Credit
5. You ignore questionable negative items on your report.
Just as it goes in life, it goes in credit score management: Question. Everything. If something doesn’t look right – it probably isn’t. If you know you are paying your bills on time, haven’t opened any new lines of credit and aren’t close to your credit utilization, but are still seeing dings to your score – you could be a victim of fraud. The best way to mitigate these risks is to check your score frequently, and with great discernment. We promise, the five minutes out of a bank’s or credit card company’s day is worth your peace of mind long-term – so make the call and advocate for yourself.
When you know you’re doing everything right for your credit score and find yourself in a healthy place with your financials – you will see the relief and joy that comes with the freedom. Now that we’ve given you the tough love, let’s have a refresher of what having a healthy credit score can do for your life: 5 Benefits of a Healthy Credit Score.
If you are struggling with any of these impacting your score and need some support, we are here for just that reason. When you’re ready to start fresh, call (832) 872 1057 or emailing firstname.lastname@example.org. Or, check out our full blog to kickstart your credit recovery journey today.