There have been numerous posts on this blog about the various methods people use to improve their credit score. But equally important, every person with established credit should be aware of the four largest factors that dramatically lower people’s credit score.
To avoid falling into the dreaded financial black hole -- a low credit score -- try to avoid the following factors, several of which consistently drive credits scores down.
Try not to:
File for bankruptcy:. It certainly isn’t rocket science -- filing for bankruptcy will destroy your credit score. In fact, declaring bankruptcy can knock as much as 200 points off your credit score.
Frequently apply for a credit card, loan, or mortgage: If you have an established credit rating, your FICO credit score will drop anywhere between 15 and 20 points each time that you apply for a new credit card, loan, or mortgage. That being said, limit your amount of credit cards to a number that you actually need. It may be tempting not to resist an offer for a credit card from your favorite store at the mall -- from Banana Republic to Neiman Marcus -- but try to avoid doing so. In the long run, saving 15% on a transaction with your Gap card will never cover the costs that you will incur as a result of a lower credit score. My best advice: Try to consistently zone out cashier(s) when they begin to chime in with additional offers before you make a purchase. As someone who used to frequently sign up for credit cards at Major League Baseball games solely to receive a free towel or T-shirt, trust me on this.
Max out credit cards: If you max out a credit card, it could cost you anywhere from 20 to 120 points on your credit score. To prevent ever maxing out a card, never carry a balance of more than 25% of the credit card’s total limit.
Miss monthly payments: If you miss a monthly payment, even only one time, you can lose up to 35 points on your credit score. I say this frequently in my posts, but regularly paying back bills on time is one of the best ways to improve a credit score.
For more factors that lower credit scores, click here.
To avoid falling into the dreaded financial black hole -- a low credit score -- try to avoid the following factors, several of which consistently drive credits scores down.
Try not to:
File for bankruptcy:. It certainly isn’t rocket science -- filing for bankruptcy will destroy your credit score. In fact, declaring bankruptcy can knock as much as 200 points off your credit score.
Frequently apply for a credit card, loan, or mortgage: If you have an established credit rating, your FICO credit score will drop anywhere between 15 and 20 points each time that you apply for a new credit card, loan, or mortgage. That being said, limit your amount of credit cards to a number that you actually need. It may be tempting not to resist an offer for a credit card from your favorite store at the mall -- from Banana Republic to Neiman Marcus -- but try to avoid doing so. In the long run, saving 15% on a transaction with your Gap card will never cover the costs that you will incur as a result of a lower credit score. My best advice: Try to consistently zone out cashier(s) when they begin to chime in with additional offers before you make a purchase. As someone who used to frequently sign up for credit cards at Major League Baseball games solely to receive a free towel or T-shirt, trust me on this.
Max out credit cards: If you max out a credit card, it could cost you anywhere from 20 to 120 points on your credit score. To prevent ever maxing out a card, never carry a balance of more than 25% of the credit card’s total limit.
Miss monthly payments: If you miss a monthly payment, even only one time, you can lose up to 35 points on your credit score. I say this frequently in my posts, but regularly paying back bills on time is one of the best ways to improve a credit score.
For more factors that lower credit scores, click here.
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