What you should do for protecting credit history?

When you take out loans, that is, use credit, then you actually promise to repay the borrowed amount within a specified time period. Your creditors usually report your credit status to all or any of the 3 major credit bureaus (namely, Experian, Equifax and TransUnion). Your credit history is based on the information (such as, your loans, credit cards, utility bills, etc.) supplied by your creditors. So, you should take necessary steps towards protecting credit history so as to prevent hurting your credit score.

How to protect your credit history?

Here are a few ways that you can follow in order to protect your credit history.

• Avoid missing/skipping payments

If you cannot make your payments within the due date, then you may have to pay late fees or the creditor/creditors may charge higher interest rate on the outstanding balance. However, it hurts more when you miss out an entire payment cycle. It may reduce your score by 90 points if your score is good. One way to avoid missing payments is to set up automatic payment with your bank.

• Negotiate for alternative payment plan

When you are not able to pay back the debt/debts, your creditor/creditors may send your credit account/accounts to collections before or even after charging them off. In such a situation, a collection status appears in your credit report that shows that you are unable to repay loan/loans.

• Avoid getting a judgment against you

Another way to protecting credit history is to avoid getting a judgment against you. A judgment shows that you not only avoided paying bills/debts, but also the involvement of court to make you pay them off. However, an unpaid judgment affects your credit record much more negatively in comparison to a paid judgment.

• Don’t lose your home to foreclosure

Apart from giving a damaging blow to your credit score, foreclosure may also affect your future ability to take out a mortgage loan. So, in order to protect your credit, you can sell your home for less than what is owed on the property; however, you’ll have to take your lender’s permission before attempting short sales. It is better alternative to foreclosure when you’re not able to pay back the home loan.

• Avoid maxing out credit card/cards

You may have to pay over-the-limit fees if you use 100% of your credit limit. In addition, your score may get reduced by 10-30 points; the higher your credit score, the more it tends to reduce. Even if you pay off the outstanding balance on your maxed out credit card, it will affect your credit record as the credit bureaus consider your last statement while computing your score. What happens is maxed out credit cards increase your credit utilization ratio thus lowering your score. So, avoid maxing out credit cards for protecting credit history.

Last but not the least, never ever close your old credit accounts, especially the oldest one, as 15% of your credit score gets affected by the length of your credit history. So, when you close your oldest credit account, it shortens your credit history thus affecting your score negatively.