What Can Hurt Your Credit Score?
Anyone who uses credit has a credit score. However, maintaining a good credit score isn’t just for borrowers any more. Besides lowering your interest rates on loans, good credit can affect your finances in other ways, such as lowering your insurance rates. Keeping your credit score high requires avoiding some blunders. What can hurt your credit score?
The company that created credit scores, FICO (Fair Isaac Corporation), developed ranges for how far a credit score drops when you make certain mistakes. The list below highlights the most significant mistakes, along with the resulting decrease in your credit score. Keep in mind that the higher your score is to start, the greater the potential hit on that score if you end up in any of these situations.
Five Mistakes That Hurt Your Credit Score
- Maxing out your credit cards: Carrying a balance that’s too close to your credit limit decreases your score by 10 – 45 points.
- Paying late: Paying any type of debt more than 30 days late decreases your score by 60 – 110 points.
- Settling a debt: Arranging with a creditor to repay a debt for less than you owe decreases your score by 40 – 125 points.
- Foreclosure: Defaulting on your home mortgage decreases your score by 85 – 160 points.
- Bankruptcy: Filing any type of bankruptcy decreases your score by 130-240 points.
Understanding how to maintain your credit score is vital because keeping your credit score high can benefit you in life beyond just borrowing. Most importantly, keeping your balances in check and making your payments on time will help you the most. Again, the higher your credit score is to start, the farther it will fall if you make a mistake. Healthy credit habits help you keep that credit score up where you want it to stay.
For more information on what can hurt your credit score health, contact us.