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

Travel1 month 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...

General1 month 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...

Lifestyle2 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...

Autos2 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...

Business5 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...

Lifestyle5 months ago

Tips For Cleaning Your Trainers

If you’re into your trainers and streetwear, you’re likely to be very conscious of keeping them looking their best! So,...

Marketing6 months ago

Branding Trends For Start-Ups in 2023

Branding is incredibly important as it impacts how your business reaches and connects with its target market. If you’re branding...

Business6 months ago

Avoiding the Wrong Kind of Growth

Growth is vital for any business – some models, like tech start-ups, are built around periods of dramatic, explosive growth...

Business6 months ago

How To Become A Property Developer

There are several reasons why an individual will want to become a property developer. One of the main reasons for...

Tech8 months ago

What Is The Difference Between Cyber Attacks and Cyber Threats?

If you own a business that uses the cloud to manage workloads, you have probably heard of the terms cyberattack...

Marketing9 months ago

3 Types of Marketing Every Small Construction Business Should Do

Construction is a very saturated sector, whether you’re a large or small construction company, so marketing should be at the...

Business9 months ago

How Relevant Life Insurance Plans Can Future-Proof Your Business

Last year, UK inflation reached the highest level that it had been for decades. The markets became unsteady and nervous...

Autos9 months ago

In a Car Accident? Here’s How to Find a Great Lawyer

If you’ve recently been in a car accident, you know that it can be an overwhelming experience. Not only do...

Education9 months ago

Considering Therapy? Here’s a Few Common Therapy Techniques Explained

If you’re considering therapy as a means to improve your mental health, you may be curious about the type of...

home repairs home repairs
Home Improvement9 months ago

Top 5 Home Repairs You Should Never DIY

DIY home repairs are all the rage these days. But before you jump on the bandwagon, there are some things...

Categories

Archives

Trending