What Damages Your Credit Score?

Your credit score is your passport to buying a new car or a new house, as well as many other things. For most people, this is enough incentive to do their best to maintain a good score. For many, a good credit score also signifies pride and honor. It's part of their reputation, so they will work hard to protect it. As the old saying goes, knowledge is power, and knowing what might cause your credit score to take a tumble is no different.

Credit Checks

When businesses have recently inquired about your credit, your score go may go down, but not too much. Multiple recent inquiries will impact your score the most. Recent inquiries combined with new accounts amount to about 10 percent of your score. Exceptions to this include banks and businesses that look at your score without your permission so that they can make a pre-approved offer to you. These inquiries do not lower your score. Also, if you are shopping for a mortgage or car loan, as long as you complete all inquiries within one month's time, multiple inquiries only count as one inquiry, which has little impact on your score.

Longevity

Together, the length of your credit history and whether you have new credit accounts for 25 percent of your score. The length of your credit history refers to the length of time you have used credit. The more longevity you have, the better. This weighs in at 15 percent of your score. The other 10 percent comes from whether you have recently opened new accounts. The newer the accounts, the lower the score. So together, if you have not used credit for very long and you have new accounts, your score will be lower than that of someone who has used credit for a long time and has no or few new lines of credit.

Closing Accounts

The number of accounts you have and the amount of money you owe as a percentage of the amount of money you're allowed to borrow affects your credit score. In fact, it accounts for 30 percent of your score. The higher your debt compared to the amount of credit you have available, the lower your score. FICO's algorithm gives you a good score for using credit, but not if you use too much of it. Closing accounts, then, can actually lower your score, because you have less credit available to you but still owe just as much, which negatively alters your percentage.

Late Payments

Regular on-time payments will never hurt your score. Late payments will. Your payment history is the most heavily weighed category on your credit score. It accounts for 35 percent of your score and includes anything 30 days late or later, whether a creditor settled with you for less money than you owed, collection accounts, how long it has been since you were late on payments, the number of delinquent accounts and the number of non-delinquent accounts. The more accounts you've been late on, especially recently, and the number of them, the lower your score will fall.

Major Issues

Foreclosures, bankruptcies, liens and judgments all have a serious negative impact on your credit score. It will fall markedly as a result of any of these major issues. And while most credit records disappear from your report after seven years, a bankruptcy remains on your record for 10 years. Surprisingly, in spite of the written record that follows errant consumers for seven to 10 years, many people manage to significantly raise their scores after one of these events in about two years.