Your credit score can range from 350 (poor) to 850 (excellent). It is not just a number showing on your credit report. The higher it becomes, it’ll be easier for you to become eligible for new credit lines. Not only that you’ll get the best rate and terms, but you’ll also become financially safe and sound. But beware of the negative items that can be listed on your credit report. They can damage your credit score more than anything else.
Here are some aspects that you may avoid to save your credit score:
1. Carrying huge account balances - Having a huge balance on your credit card can make your credit utilization ratio higher. The ratio is calculated by using the last month's balance-in-hand, that is showing on your bill. Your score can be damaged even if you pay off the entire balance each month.
2. Closing your cards - Closing your credit cards can lower the available credit amount, which can hit your debt utilization ratio.
3. Paying your bills late - Your payment history is always in no. 1 priority that lenders consider. It also makes up nearly 35% of your FICO score. Paying your bills late on student loans, credit cards, home loan payments, utility bills and even medical bills may lower your credit score if it gets reported to the credit bureaus.
4. Getting defaulted - Declaring bankruptcy or going for foreclosure may easily cut off 100 points or even more from your credit score.
5. Having too many credit lines - If you're continuously adding more credit lines, credit companies may consider it as a potential risk and you may also become overextended at some point.
6. Not having a credit card - Without having any credit history, any lender may typically consider you as unworthy. If you don’t have enough activity on your credit file, it will not generate any score either. So, without any credit score, the lenders won’t treat you as a worthy applicant for a loan.
7. Co-signing - A co-signer bears similar responsibility for the amount owed to the creditor, meaning any late payments or defaults will be listed on your credit report if you cosign a loan.
8. Collection activity - When the creditor gets tired of getting non-cooperative behavior from you, he might appoint a third-party collection agency. Either the real creditor or the collection agency may report your account (in collections) to a credit bureau. As a result, your account will be marked with a "collection" status. This can lower your credit score by a substantial amount.
9. Public recordings - Tax liens, judgments, and similar activities are considered like killers for your credit rating. Judgments remain for 10 years; in some states, it may remain listed for 20 years, even if you pay off the debt. Bankruptcies can remain in your credit report for long 10 years and unpaid tax liens never go away.
10. Debt settlements - If you pay off only a part of your unsecured debt (for example, credit card debt) through a settlement, it can be harmful to your credit score.
11. Foreclosures - If you don’t pay off your mortgage, the lender will eventually go for foreclosure and occupy your home. Another 7-year negative notification will lower your score. This also happens when you convey your home to the lender in a deed-in-lieu of foreclosure to avoid proceedings.
12. Repossession – When you don’t pay off your car loans, a “bounty hunter” will be coming after your vehicle without any notice. It’s a legal activity. The person can repossess your property and your credit score will definitely fall down.
Remember, your credit score is the key to your future financial success. Never ignore any single reason that can hurt your credit and make you a dead meat.