WHAT ARE THE MOST COMMON FACTORS THAT CAN LEAD TO A BAD CREDIT SCORE?
Bad credit is not uncommon in today’s economy, and unfortunately a bad credit score can make it difficult when it comes to managing your finances. There are various actions people do either knowing or unknowingly that can hurt their credit history. Here is a brief listing of some actions that you should stay away from.
Bankruptcy:
If you have filed for bankruptcy, you will have a critical fault as well as a bad credit score. Do what you can to avoid a bankruptcy.
Collection Status:
Having accounts in collection status plays a major role in your bad credit score. When making frequent defaults, a collection agency may be hired to recover the debt. Unfortunately this shows that you are not sustaining your end of a contract.
Foreclosure/Repossession:
When falling behind on your payments, you will most likely ending up foreclosing, or finding yourself in the middle of a repossession. Creditors are going to be determined in getting their money back. When all else fails, they are left with reselling you car or home to get their money. This can crush your credit score, making it difficult to get approved in the future.
High Balances on Credit Cards:
Your level of debt is determined on how much of your available credit you utilize. Example: when you have high balances on your credit or card or even max your credit card limit, your credit utilization is 100%. Keep balances as low as you can. High balances do much harm to your credit score.
Inquiries for Debts and Loans:
When making an excessive amount of inquiries over a short amount of time will lower your credit score. This consists of 10% of your credit score. Stay away from applying for credit at multiple locations. Check your credit score before applying. Make sure you will get approved.
Late Payments:
35% of your FICO score depends on your payment history. It plays a significant role in your credit score. Making late payments can do serious damage to your score. Keep ahead of your monthly bills.
Shorter Credit History:
Your length of time in the credit bureau contributes 15% of your credit score. If you are just starting out in your lifelong commitment to credit, apply for a bad credit car loan. There are banks and lenders that will work with you. Start by building your credit score proper. Make your payments on time. If you have established yourself in the credit bureau, keep your credit cards open. The older the card, the better it is for your credit history as long as your payments are current.
When the Status of an Account is Charged Off:
When ignoring your bills and collectors, your creditors may charge off your account. They are doing so because they assume you will not pay your bills. An open line of communication with your collectors is very important. When you feel you are falling behind, call your creditor and explain your situation. A charge off showing on your credit bureau will cause severe damage to your credit score.