Common Mistakes That Hurt Your Credit Score
Over the last decades, people have become extremely dependent on using credit when making important purchases (e.g. houses, cars, and furniture) and decisions. This is one of the reasons why it is extremely important to have a good credit score. Building a strong credit history and maintaining a solid credit score can have a dramatic effect on your current and future life. Businesses often check your credit history and score before extending their products and/or services. While building a good credit score is important, it is also critical to learn the actions that can damage your credit score.
Your past payment history is considered to be one of the most important factors that determine the credit score of a person. In fact, your credit score comprised of 35 percent of your payment history. Hence, being consistently late in paying your bills can absolutely hurt your credit score.
Failure to Pay the Required Minimum Amount
Creditors will often report customers, who are unable to make the minimum amount of payment, as past dues. Making payments that are less than the minimum results in late fees and additional interest, which does not only damage your score but can add up pretty quickly.
Maxed Out Credit Card
Thirty percent of your Fair Isaac Corporation (FICO) score accounts your credit utilization. Maxing out your credit card can reduce your score by 10 to 45 points. If you want to have a better score, make sure to maintain a balance that is relatively lower than the available credit.
Owning Too Many Credit Cards
Many people are tempted to sign up for credit cards for free gifts, this can have damaging effects on your score. Potential creditors may question your ability to repay and settle all your obligations if you decide to consume all the credit provided by your cards. Owning and using various credit cards can put you on the verge of getting too deeply into debt.
The creditor will charge off a debt when they decided that you have lost the ability to settle your loan and write your account off as a loss. Although the charged off account is no longer available for future use, the creditor will still continue to report your past dues and balances to credit agencies.
Declaring a bankruptcy can have the biggest and most negative impact on your credit score. It can cost your score from 130 to 240 points. Additionally, a bankruptcy will continue to reflect on your credit score for up to 10 long years.
If you are looking forward to a mortgage application, it is more critical than ever to prepare your credit score. Luckily, reputable and trusted mortgage credit repair companies that can help you qualify for a better and more cost-effective mortgage and save money from high premiums.