Things That Lower Your Credit Score

Protecting your credit score from damage is crucial because your major purchases in life such as a home or a car depend on it. Maintaining a healthy credit score or improving your credit worthiness starts with being aware of the things that can lower your credit score. It does not take long to learn the basics of good credit management, but achieving a favorable credit rating requires consistent responsible behavior over time.

Missed Payments

Failing to pay on time can significantly lower your score. Even if you have been delinquent only for a month, the negative impact on your score can be major. Late or missed payments give the impression that you are less trustworthy. If you missed payments, get current. Avoid transferring your balance from one credit card to another.

Closure of Old Credit Cards

Do not close your old credit cards because they show how you have handled credit through the years. The older your account, the higher your credit score is because it signifies that you can be relied on to make payments on time.

Excessive Inquiries

When you apply for a credit, you allow the lenders to inquire or ask for a copy of your credit report from a credit bureau. When you see your credit report later on, you will find that these inquiries are listed. A high number of credit inquiries over a short period of time may be interpreted as a sign that you are financially desperate or that you may be taking on more debt than you can manage.

High Credit Card Balances

Your credit score will be affected if your credit card balance is close to the credit limit. Ideally, it is best to keep your credit card balance below 35 percent of your credit limit. For example, if your credit card has a $5,000 limit, keep your balance below $1,750. Exceeding your credit limit will also affect your credit score.

Opening Many New Accounts

If you have a short credit history, do not be in a hurry to open a lot of new accounts. These new accounts could lower the average age of your accounts. Give yourself time to establish your credit worthiness.

Bankruptcy

Your credit score takes a dive after you declare bankruptcy. You will find it hard to obtain a credit card, and you may have to settle for a secured credit card that requires a deposit to help you start rebuilding your damaged credit. The credit limit of a secured credit card is equal to the amount that you have deposited with the financial institution. The lender can then use the deposit to pay your debt in case you fail to meet your obligation.