13 factors that affect your credit score

Credit score is a numerical representation of your credibility related to debt and your financial responsibilities. The credit score is used by lenders, credit card issuers employers etc to judge your willingness to repay a particular loan that you have availed.

Given below are 13 factors that can make your credit score nosedive miserably:

1.Late payments

Your payment history makes up 35% of the credit score. Making late payments regularly affect your credit score negatively. The creditors usually notify the credit bureaus, the rate of interest you are being charged now escalates and so do the interest rates of other credit cards, you will be required to pay late fees etc. To avoid such hassles, it is better to be regular with payments.

2.Making no payments at all

Still worst is not paying heed to the credit card bills. In due course your account gets charged off.

3.Charging off an account

If the lenders are convinced that you are not willing to pay your credit card bills, they usually charge off your account. Having an account charged off makes your credit score backslide miserably.

4.Sending an account to collection agencies

Lenders may sell debt accounts to collection agencies if they have failed to collect credit card payments from you. Creditors usually do this either before or after the account has been charged off. Once this is done, collection agencies harass you to no end to collect the dues that you are supposed to pay.

5.A loan default

A loan default indicates that you failed to comply with the terms and conditions of the contract that was agreed upon between you and you lender. This sends wrong signals to the lenders.

6.Filing for bankruptcy

Bankruptcy should be the last option to get out of debt. Filing for bankruptcy not only hurts your credit score but it also causes a lot of mental agony. There are various other alternatives to bankruptcy. Some of the alternatives to bankruptcy include -credit counseling, debt consolidation, debt settlement, debt management program etc.

7.Foreclosure of your home

If you do not make regular mortgage payments, it ultimately leads to foreclosure. This affects your credit score to a large extent. You not only lose your property but also lose the opportunity of having a good credit score.

8.A judgment

A judgment indicates that since you did not pay your bills, the court had to intervene in making you pay the debts. This is one of the factors that hurt your credit score.

9.Having high credit card balances

If your credit card balances are high as compared to the credit limits, it leads to higher credit utilization thereby decreasing your credit score.

10.Having credit cards which are maxed out

Credit card balances that have maxed out or exceeded the permissible limit causes credit utilization to be 100% and this makes your credit score drop to a great extent.

11.Closing credit cards still having balances

If you close credit cards that still have a balance, the credit limit becomes 0 while you still have some balance left in the account. This gives the impression that your credit card has maxed out. It makes your score get lowered.

12.Closing down older credit cards

Duration of your credit history makes up 15% of your credit score. It is always desirable to have credit histories which are longer. If you close your older credit cards it may give an impression that you actually have a shorter credit history.

13.Applying for multiple loans or credit cards

Credit inquiries make up 10% of your credit score. Applying for credit several tines within a short time span actually ruins your credit score. It is best to keep applications to a minimum.

Related sites :

Improve Credit Score – Update your credit score knowledge.
Free credit report – Free-Credit-Reports.com: Get 3-in-1 FREE credit report and credit score online instantly. See your credit report from Equifax, Experian and TransUnion.
TheCreditTruth.org – The site offers free credit report information for confused consumers.
How To Fix Credit – Increase your Credit Score with AVAIL CC online program.