What’s The Worst You Can Do To Your Credit Score?

As the credit rules are changing for both consumers and the credit card industry, people are becoming more and more aware of what is going on with their credit score and what actions have a negative impacts on that score. With more people trying to improve their credit score, they have become more conscientious about managing their credit. One of the most popular and important questions is usually:

What is the worst thing you can do to hurt your credit?

While credit scores are compiled of many different factors, one of the worst things you can do concerning your credit is miss a payment, followed second by paying your bill late. Essentially, when you miss a payment or pay one after the due date, you are breaking the contract you agreed to honor with the credit card when you applied for and accepted the credit card. Missing a payment is not living up to your promise and so the credit card company will take that seriously, penalizing your financially with increased interest or late/missed payment fees. These fees end up accruing and increasing your balance until it may actually get to a point where the balance becomes insurmountable.

If you consistently are late in paying or not paying at all on your credit card balances, your credit score will likely fall quickly. 35% of your credit score is actually based on your credit history. If that history shows late payments, no new lenders will be willing to give you credit if you’ve successfully proven you are not reliable with your payments. The only way to avoid such pitfalls and reduced credit scores is to keep making those payments each month, even if the minimum is all you can afford in your budget.

Here are some other tips you may also want to consider in order to keep your credit score strong and ways to improve it once you’ve gotten your finances back on track:

1. Do not close out existing credit card accounts. Even if you do not currently utilize each card you have, closing out accounts will affect your credit because of the reduction in your debt to credit ratios. Additionally, if you close your credit card account that has been open for the longest period of time, you’ll negatively impact the length of the credit history.
2. To keep your lesser used cards current and in good standing, charge small purchases and pay them off in full that month.
3. Remember that it is important to keep your debt to credit ratio below 35%. Add all your debts and all of your credit limits and make sure your your debt is less than half your credit line to keep your credit score in the good.
4. Don’t abuse credit. Applying for too many credit cards in a period of time doesn’t look good to other lenders and may decrease your credit score in the process.

Following these rules of thumb can help keep your credit score strong at all times. Paying down your debts in important but it is even more important that you learn to control your spending and not use your credit as an extension of your income in the first place. If you can safely use credit cards and be responsible about the amount you are charging on your credit each month, you will remain in control of your credit. You also need to stay up to date on the changes to your credit card to ensure you are doing all that is expected of you for good credit.

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This entry was posted on Tuesday, June 23rd, 2009 at 9:54 pm and is filed under Credit Card News, Debt & Consolidation, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.