Things That Negatively Affect Your Credit Score

By on November 15, 2012

Credit scores are very important, especially if you are in need of a loan to purchase a home or if you are in a situation where you need to refinance in order to pay off your debt.  If you do not keep track of your credit score, you can inadvertently harm your financial reputation by decreasing your score and appearing untrustworthy and irresponsible to those who issue loans and lines of credit.  It is important to know what your credit score is, but it is also very important to know how your actions can move your credit score up or down.  The higher your credit score, the better, so you will want to avoid the following actions which can dramatically decrease your score.

Actions to Avoid

In order to keep your credit score high and standing strong, avoid using more than 80% of your entire credit line.  Add up the lines of credit you have with every credit card you own, and determine what 80% of that amount is.  Then, keep your spending in check by always spending less than that amount.  This will make financial institutions view you as someone who is responsible about their spending, who will not risk going into debt just to purchase something they want.  In addition, it will prevent you from accruing too many expenses that you may potentially be unable to pay off.

Being late on your payments and being unable to pay off entire bills on time will result in a decrease in your credit score.  The longer you are unable to pay off your bills properly, the lower your score will go.  Not only will you be dealing with high interest rates and late fees that are added onto your current pile of debt, but financial institutions will be unwilling to loan money or provide more credit to an individual who clearly cannot pay off his/her debt.  Keeping your spending in check, at about 20-25% of your entire credit line, will help you take the first step toward decreasing your monthly credit card bills.

If you are unable to maintain steady employment or are unemployed for a long period of time, your credit score will suffer.  Try to find at least steady part-time work, even if it does not pay enough, rather than remain completely unemployed.  Financial institutions value customers who are employed, generating an income to pay off their bills.  You can also attempt freelance or contract work to at least get temporary short-term or long-term employment under your belt.

If you are asking for additional credit lines too often, this can lower your credit score.  Every time you apply for a new credit card or a loan, the lender or credit card company runs a credit check on you.  The more people need to look into your score, the more suspicious you seem, resulting in a lowered overall score.  Therefore, avoid asking for additional credit unless absolutely necessary.

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A credit check is an easy way to determine where you stand in the financial world.  If your credit score is high, you can apply for more credit or for a loan with confidence.  If your credit score is too low, work on adjusting the score by changing the way you spend and pay your bills.

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