Connect with us

Finance

5 Ways You Accidentally Destroy Your Credit Score

Your credit score is a critical factor lenders use to decide whether they’ll risk loaning you the money for major purchases such as an automobile. Did you know that some of the things you do that you think might improve your credit score actually cause it to take a nosedive? Here are five ways we destroy our credit score without even knowing it.

#5 – Letting Library and Other Minor Fines Languish


5 Ways You Accidentally Destroy Your Credit Score

Image via Flickr by koocbor

You might think that not paying library fines or traffic tickets is no big deal, but a growing number of municipal governments are sending these unpaid fines to collection agencies. A whopping 35% of your FICO score is based on payment history, and having an account in collections means you haven’t made one in a very long time. The result is a significant drop in your credit score. It makes sense, therefore, to pay these fines as soon as you get them.

#4 – Closing Credit Card Accounts with Zero Balances

Don’t close those old credit card accounts you rarely use. They establish your credit history over a long period of time. Getting rid of them will negatively impact your payment history and cause your credit score to drop.

#3 – Not Using Your Credit Cards


5 Ways You Accidentally Destroy Your Credit Score

Image via Flickr by vitamindave

You also want to use those old credit cards from time to time. If a lender views an account as “inactive,” it may decide to close it. Now you have less credit available, and this negatively affects your credit utilization ratio, the amount of credit available versus the amount owed, as well as your credit score. Shoot for a credit utilization ratio of 25%, that is, the amount owed on your accounts is 25% of your available credit. Use these accounts sparingly, however, and be sure to pay them off in 30 days.

#2 – Consolidating Debt

Consolidating several credit card balances into one consolidated loan may make it easier for you to pay off the balance, but it can also cause a drastic drop in your credit score. The reason is twofold. First, to determine your credit-worthiness, the consolidation company makes a “hard inquiry” on your credit report. Too many of these over a short period of time can result in a slight dip in your credit score (see #1 below).
More importantly, the potential is great that you will start adding to the balances of those now empty credit cards. Add in that huge consolidated loan you just received, and you’ll end up owing even more money, resulting in a hefty drop in your credit score. If you’re in this position already and want to buy a car, car loans for bad credit may be what you need to look for.

#1 – Making Too Many Credit Requests


5 Ways You Accidentally Destroy Your Credit Score

Image via Flickr by Kaiyan

Finally, don’t make too many credit requests before you need to make a major purchase that requires a loan. Even though inquiries on your credit report account for less than 10% of your FICO score, you might give lenders the impression you are strapped for cash, and they will consider you a credit risk.
Your credit score is a precious commodity. Take steps today to keep from unknowingly damaging it.

Continue Reading

Recent Posts

SEO1 day ago

The Importance of Local SEO for Small Businesses

There are many different types of businesses and all of them will require online marketing however, with a small business,...

General2 days ago

Understanding The Unsung Heroes: Cool Rooms And The Importance Of Regular Repairs

Everybody loves a breath of fresh air when entering a superstore! But have you ever wondered who’s working backstage to...

Home Improvement4 months ago

How To Add More Value To Your Home

If you have some spare cash in the bank, it is likely you would like to spend it on your...

Lifestyle4 months ago

What is a Deep Plane Facelift

Cosmetic surgery is a choice that needs a lot of research and when it comes to thinking about a facelift...

Entrepreneur4 months ago

Unveiling the Demand for Digital Marketing Courses: A Comprehensive Analysis

In recent years, the realm of marketing has undergone a seismic shift propelled by the digital revolution. As businesses increasingly...

Home Improvement4 months ago

What Does an Effective Wardrobe Spring Clean Entail?

Spring is upon us which means one thing and one thing only. It is time for the annual purge of...

Business6 months ago

Your Basic Guide To Creating A Unique Investment Blog

Starting your own blog is great and once you get the ball rolling, it can be a good passive income...

Business6 months ago

3 Low-Risk Ways To Get Your New Business Started

Once you’ve got an initial business idea and believe that it will be a success, there are some basic things...

Lifestyle6 months ago

Conquering the Co-free Zone: Tips for Thriving as a Remote Worker

Adjusting to an office environment can come with its downfalls in the sense that it might be a shock to...

General7 months ago

3 Ways To Take Control Of Your Finances Starting Now

If your finances have taken over and are bringing stress to your life, we understand just how overwhelming it can...

Travel9 months ago

Best Places To Visit In The North Of England

If you live in England, you will know there are many different places to visit for the weekend. There are...

General9 months ago

Green Home Improvement Ideas

In a world where environmental concerns are growing, the concept of “green” has gone beyond a trendy catchphrase and is...

Lifestyle9 months ago

How to Host an Unforgettable House-Warming!

The time has finally come. You have moved into your dream pad, and are officially adulting in your very own...

Autos9 months ago

A Guide to Parking Lot Striping

The journey to a well-striped parking lot begins with the right paint. In this brief guide, we’ll unravel the mystery...

Business12 months ago

Business Tips For Protecting Your Finances During A Recession

In 2023, taking the necessary steps to protect your finances for your business is now more important than ever. The...

Categories

Archives

Trending