The 5 Fastest Ways to Damage Your CreditBy Michelle Black

Let's face it, the world of credit can be confusing and overwhelming.  Learning how to achieve and maintain a healthy credit score takes a lot of studying and usually some professional assistance.  With 3 different credit bureaus (all of who work for your creditors, not for you!) having 3 completely different credit scoring systems it is easy to feel like you will never understand how to navigate your way through the credit maze.

However, there is some good news.  There are common factors that will cause your credit scores to increase with all 3 credit bureaus.  There are also common factors or actions which will cause your credit scores to decrease with all 3 credit bureaus.  Today, we will discuss 5 of the common factors which will cause your credit scores to decrease, or 5 of the fastest ways to lower your credit scores.  (Stay tuned later this week for 5 common factors which will cause your credit scores to increase!)

1.  Making late payments on current credit. Did you know that 35% of your credit score is based upon your payment history!? In fact, payment history actually makes up the largest portion of your credit score.  Therefore, making a late payment on a current account (i.e. credit card, student loan, car payment, mortgage payment, etc.) is by far the very quickest way to see a dramatic decrease in your credit score. 2.  New collection accounts. If a new collection account such as a medical bill, unpaid utility bill, cell phone bill, or any other negative account appears on your credit report you are very likely to see a sharp decrease in your credit scores with all 3 bureaus.  Collection accounts all affect your credit report negatively; however, a NEW collection account has more impact upon your credit scores than an old collection account. 3.  Higher credit card balances. This tricky factor often surprises many of our members.  Since 30% of your credit score is determined by the amounts you owe on your credit accounts then having a high credit card balance, especially if it is over 50% of the credit card limit, can significantly lower your credit scores even if you are making your monthly payments on time.  So, if you have a $200 Target charge card and you spend $150 on the account you have likely lowered your credit scores with all 3 of the credit bureaus.  Luckily, this problem has an easy solution.  When you pay off your credit card you should regain the points lost due to the higher balance. 4.  Opening an excessive amount of new credit. 15% of your credit score is determined by the age of your open credit accounts.  While it is important to have enough open credit accounts on your credit report it is also true that opening too many new accounts can lower your credit scores, at least temporarily.  It is recommended that you consult with a credit specialist or professional before opening new accounts, especially if you are planning to make a major purchase such as a home in the near future. 5.  Applying for an excessive amount of credit. Number 5 goes hand in hand with number 4, but there is an important difference to point out.  The simple act of applying for too much credit can lower your credit scores even if you are turned down for the new accounts.  The fact is that every time your credit is pulled for a new credit application you lose an average of 1-3 points (depending upon the credit bureau) and you will  typically not recover these p0ints for 3-6 months.  Now, 1-3 points per credit pull may sound like a small amount to you, but if you apply for 10 new accounts in a month you could be losing up to 30 points from your credit score! So, the next time you are in your favorite department store and someone offers you a 15% discount "just for applying for our credit card today" your best bet is to offer the sales clerk a polite "no thank you."

Don't forget to check back for part 2 of this blog series later this week.  Today we discussed 5 of the most common actions you want to avoid in order to prevent your credit scores from dropping.  Later this week we will discuss some common ways to help achieve healthier credit!

If you or someone you know is in need of professional credit advice or assistance, please take the time to consider the credit specialists at HOPE.  We would love the opportunity to answer your questions and offer our unique expertise on all situations related to your credit report and credit scores.  Remember, there truly is no such thing as a HOPEless situation! Please feel free to give us a call with any questions you may have at 704-499-9696.