Credit Repair

8 Most Common Factors That Lead To Bad Credit Score

A bad credit score can make it very difficult for you when it comes to managing your finances. This is a very important number and your financial life depends very much on it. There are several things people do either knowingly or unknowingly that hurt their credit history. Following is a brief rundown on some of those actions that you should stay away from.

Late Payments

Late payment is the biggest culprit that can seriously hurt your credit. It is very important for you to keep in mind that 35% of your FICO score depends on your payment history. If you are making frequent defaults, it will not take much longer to damage your credit history.

When the Status of Your Account is Charged Off

When you keep ignoring your credit card bills, your creditors may charge off your account, assuming you will not pay the bills. A FICO report with instances of such account status will show a very bad credit score.

Collection Status

Having accounts in collection status is another major factor. When you keep making frequent defaults, your creditors may hire a collection agency to recover the debt. Such things only show that you are not fulfilling your end of the loan contract.

Foreclosure

When you get far behind your mortgage payments, you are very much likely to end up having your home foreclosed. Creditors are only interested in getting their money back. When all other alternatives fail, they can even sell your home to get their money. This will further hurt your FICO score, making it very difficult for you to get approved for future home loans or credit.

Bankruptcy

Bankruptcy is obviously the last thing that you want to happen with you. Needless to say that if you have filed for bankruptcy and have been granted the same, you will have a seriously blemished and bad credit score.

High Balances on Credit Cards

Your level of debt is determined by credit utilization. When you have high balances on your credit cards, it means your credit utilization is very high. Low credit utilization means higher score and low balances on your credit cards, and vice versa. In case you max out your credit card limits, it means your credit utilization is 100%. This is the worst possible scenario that will make your FICO score almost beyond repair.

Shorter Credit Histories

The length of your credit history contributes to 15% of your credit score. It means it is better to have longer credit histories. Closing your old credit cards where you have no dues is not a good strategy. The older your cards are, the better it is for your credit history as long as you are current on your payments. Keep those cards even you are not using the same.

Placing Enquiries for Loans and Debts

Ten percent of your credit score is measured by the number of loan and debt enquiries you make. If you have made a high number of such queries over a very short period of time, it will lead to a significant fall in your FICO score.

Overall, if you do not want to earn a bad credit score, you must stay away from all these actions.


Custom Search

Tags:
Posted in Credit Repair, Credit Score | 1 Comment »

One Response to “8 Most Common Factors That Lead To Bad Credit Score”

  1. Albert says:

    Good Article. A credit score is a numerical expression or face based on the study of a person’s credit files. This article basically specifies the various factors that lead to a bad credit score. If every one follows the above mentioned factors, he/she will earn a good credit score. It is very true that credit score depends up on the payment history also. So try to maintain your history totally clear and deposit the amount on exact time. If you are not depositing the credit card bills on time, the credit card companies will block your account after giving some warnings. This impression will lead to a bad credit score and will make it very difficult to for you to get any new loan or debt in future. Credit Utilization also plays an important role for maintaining the credit score better. If utilization is very low, it means your credit score will be high. So, try to maintain your balances low on credit cards. With this process, you will save the good amount. “Shorter credit histories”, this point is also very interesting and informative. If you have short histories, it will be better for you and definitely find the score very good.

Leave a Reply

You must be logged in to post a comment.