There are many different ways to ruin your credit score, but some ways are easier than others are. In many cases, these actions are performed without the person ever realizing that they are affecting their credit score negatively. The damage is generally discovered when the person applies for a mortgage or additional credit and they are denied. That is when they realize that they have misunderstood how their credit score has been affected by their past financial actions.
Here are some common actions that can affect your credit score negatively and what the results of those actions may be. Avoiding these actions will help you keep your credit score high and the interest rates that you pay for credit products low.
Making Payments Late
Making payments on your accounts late is a sure way to ruin your credit score quickly. Each time a late payment is reported to a credit-reporting agency, it will cause an immediate, significant drop in your credit score. If the information is accurate, there is nothing that you can do to remove it from the credit report. Most negative information will remain on your credit report for a period of seven years.
Applying For Additional Credit Products
Applying for additional credit can also cause a drop in your credit score. Your credit score is reduced by a few points every time that you allow your credit score to be viewed by a company that is considering extending credit to you. Companies cannot check your credit without your authorization so you will be aware of when your credit score is being checked. It is important to refrain from having many companies checking your credit report before you apply for major credit products, like a mortgage or a personal loan, because the reduction in your credit score from the inquiries could cause you to be charged a higher interest rate.
Canceling Credit Cards That You Have Held For A Long Time
Canceling a credit card can affect on your credit score greatly. The length of your credit history is part of the calculation of your credit score and, if a long-held credit account is removed from your credit history, your credit history looks shorter. The amount of credit you are using versus the amount of credit you have available is another feature of the calculation and removing a credit card with a high limit will reduce the amount of credit that you have available, skewing the calculation negatively.