10 Things That Can Hurt Your Credit Score

10 Things That Can Hurt Your Credit Score

Your credit score is one of the most important factors of your financial life. While it’s important to know what things help you build a good credit score, you also have to know those things that could hurt your credit score and lead to side effects from bad credit. If you avoid doing these 10 things, it will help ensure a good credit score.

Paying Late

Consistently being late on your credit card payments will hurt your credit score. You should always pay your credit card bills on time to preserve your credit score.

Not Paying at All


Completely ignoring your credit cards bills is much worse than paying late. Each month you miss a credit card payment, you end up one month closer to having the account charged off.

Having an Account Sent to Collections


Creditors often use third-party debt collectors to try to collect payment from you. Creditors might send your account to collections before or after charging it off.

Defaulting on a Loan


Loan defaults are similar to credit card charge-offs. A default shows that you have not fulfilled your end of the loan contract.

Filing Bankruptcy


Bankruptcy is an extreme measure and will devastate your credit score. It also stays on your record for seven years. It’s a good idea to seek alternatives, like consumer credit counseling, before filing bankruptcy.

High Credit Card Balances


The second most important part of your credit score is the level of debt, measured by credit utilization. Having high credit card balances (relative to your credit limit) increases your credit utilization and decreases your credit score. In other words, if your limit is $15,000 and your balance is $14,500, you will not have a good score.

Maxed out Credit Cards


Maxed out and over-the-limit credit card balances make your credit utilization 100 percent. This is the most damaging thing you can do for your credit score.

Closing Old Credit Cards


Another component of your credit score, 15 percent, is the length of your credit history—longer credit histories are better. Closing old credit cards, especially your oldest card, makes your credit history seem shorter than it actually is. Even if you don’t use the card anymore, if there’s no annual fee, you should keep the card open because you have nothing to lose.

Applying for Several Credit Cards or Loans


Credit inquiries account for 10 percent of your credit score. Making several credit or loan applications within a short period of time will cause your credit score to drop.

Having Only Credit Cards or Only Loans


A mix of credit is 10 percent of your credit. When you have only one type of credit account, either loans or credit cards, your credit score could be affected. Usually, this comes into play when you have very little additional credit information in your credit history.

If you’re looking for a credit counsellor in Toronto, get a quick assessment with us today or call us at 416.900.2324. We will help you develop a plan, reduce your interest costs and get out of debt over time.

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