Everyone knows a good credit score can make life easier and a poor one can make life difficult. Poor credit can make it difficult to buy a home or a new vehicle, rent an apartment, or even get the job you really want. Your insurance rates can also be affected in some cases. What’s worse is that many people do not know some of the things that can easily ruin their credit. Here’s a look at 5 of the things that can easily ruin your credit scores:
- Filing for Bankruptcy
People are often under the impression that filing for bankruptcy will make it easier for them to get credit because they will have “resolved” their credit problem. You can fix your credit in about three years if you start shortly after the bankruptcy releases you from your credit responsibilities, but a bankruptcy will remain on your credit report for up to 7 to 10 years. In addition, and most people don’t know this, bankruptcy can result in your credit score being reduced by 200 points or more.
- Applying for Credit Cards You Don’t Need
Every time you apply for a credit card a “hard inquiry” shows up on your credit report and causes your score to decrease by a couple of points. If you make only occasional applications for credit, it’s not a big deal. But if you apply for every credit card that comes down the line, those points can add up quickly and turn a fair score into a poor one.
- Co-Signing a Loan for Someone
Co-signing a loan for someone can be one of the worst things you can do for your own credit rating. If someone needs a co-signer, the reason is most likely to be that he or she had difficulty paying off other loans or credit responsibilities and so cannot qualify for a new loan. That is not always true, and co-signing for someone else isn’t always going to result in a bad situation for you, but be careful when agreeing to do so. If that person consistently makes late payments or defaults altogether, it will affect your credit as well.
- Late Payments, Charge-Offs or Collections
Making a loan or credit card payment a few days late may result in a late charge, but it won’t affect your credit. Nonetheless, if your account becomes past due by 30, 60 or 90 days, a creditor is very likely to report it to the credit bureaus which could result in your credit score dropping by 60 to 100 points or even more. If you completely default on a debt, a collection account, judgment, foreclosure or charge-off will reduce your score by even more and the reduction won’t come off your credit report for 7 years.
- Not Checking Your Credit Report
This is one of the simplest things to do, and yet many people don’t do it. It’s amazing how many times credit report errors are the cause of credit scores being lower than they really should be. You can check your credit with all three of the reporting bureaus for free once a year. However, be aware that you should do this through a credit monitoring service. A credit repair company such as The Credit Pros can help you make sure you are doing it right.