5 Things That Kill Your Credit Score


Bad credit can sneak up on you. You may think a late payment here-and-there is no big deal but little things can build up fast and can be difficult to reverse. Here are five common things that can kill your credit score...

1. Late Payments

Paying late is the fastest way to tank your score. This aspect of credit is weighed the heaviest when calculating your overall score. In fact 35 percent of your score is made up of your payment history. In addition to brining down your score late payments can also increase your interest rate to the penalty rate and you will often be charged a fee by the bank. 

You can sometimes get ahead of a late payment since it takes 30 days to be reported by calling your credit company and making a payment with the late fee. But once you have gone 180 days without paying the creditor will write it as a charge-off and that will be on your credit report for the next 7 years.

2. High Balances

We all know having maxed out cards is not a good thing but so is having a high balance. Credit utilization is a key component in determining your score making up nearly 30 percent. The more money you owe (as a percentage of the limit) the lower your score. To put it in understandable terms if your limit is $10,000 it is better for your score to owe 10 percent of that ($1,000) than 50 percent ($5,000) even though both are under the limit and payments are made on time.

3. Having Too Many Cards

Having many credit cards isn't necessarily a bad thing if the balances are low, payments are made on time and the lines of credit have been established for a long time. But if you open too many in a short period of time those pings will lower your score. Credit inquiries account for about 10 percent of credit and each inquiry stays on your report for 2 years.

4. Closing Accounts

You may think that closing credit accounts that you no longer use will clean up your score but that is not the case. If you have a card you don't use any more do not close it. Closing it will weigh your credit utilization in the wrong direction, lowering your score. Establishing positive lines of credit that exist for many years is important when establishing good credit, lenders trust people with older credit lines. So you can cut up those credit cards but don't formally close the account even if you never intend to use it again.

5. Defaulting on a Loan

Like a credit card charge-off defaulting on a loan is a negative event that will exist on your credit for years. If you have a loan you cannot repay talk to the lender and try to re-finance or put a temporary stay on payments if you are sick or lost your job. It is better to negotiate to something you can afford than to stop paying.