What hurts your credit score?

    Key Summary
    Maintaining a good credit score is important for financial well-being. This blog post outlines five common factors that can harm credit scores, including late payments, high credit utilization, too many credit inquiries, debt settlements or default, and a short credit history. The post provides tips for avoiding these factors and building a good credit score over the long term.


    Credit scores are an essential part of financial well-being, especially when it comes to taking on debt. A credit score is a number that represents a person's creditworthiness, and it can range from 300 to 850. The higher the score, the better the creditworthiness, and vice versa. Several factors contribute to a person's credit score. In this blog post, we'll look at five common factors that hurt your credit score and how you can avoid them.


    Late or Missed Payments

    Late or missed payments are one of the most significant factors that can hurt your credit score. Your payment history makes up about 35% of your credit score, so it's essential to make your payments on time. If you miss a payment, your creditor can report it to the credit bureaus, which can lower your credit score. Late payments stay on your credit report for seven years, and they can affect your credit score for a long time.

    To avoid late or missed payments, it's crucial to make a budget and set up automatic payments. You can also set reminders on your phone or calendar to help you remember when your payments are due.


    High Credit Utilization

    Credit utilization is the percentage of your available credit that you are using. For example, if you have a credit card with a $10,000 limit, and you have a balance of $3,000, your credit utilization is 30%. High credit utilization can hurt your credit score because it can indicate that you are relying too much on credit and may be overextended.

    To keep your credit utilization low, it's recommended that you keep it below 30% of your total credit limit. You can also pay off your balances in full every month, and you can request a credit limit increase to lower your utilization rate.


    Too Many Credit Inquiries

    Whenever you apply for credit, a hard inquiry is added to your credit report. A hard inquiry can lower your credit score, especially if you have several inquiries in a short period. Too many credit inquiries can indicate that you are taking on too much credit, which can make lenders wary of extending credit to you.

    To avoid too many credit inquiries, it's essential to limit your credit applications. You can also consider applying for credit from one lender at a time, and you can research lenders and credit products before you apply.


    Debt Settlements or Default

    Debt settlements and defaulting on loans can have a significant impact on your credit score. Debt settlements occur when you negotiate with your creditors to settle your debt for less than you owe. Defaulting on a loan means that you have failed to pay what you owe, and the lender has taken legal action to recover the debt.

    Debt settlements and defaults can stay on your credit report for seven years or more, and they can make it difficult for you to get approved for credit in the future. To avoid debt settlements or defaults, it's crucial to make a budget, and you can consider working with a credit counseling agency if you're struggling with debt.


    Length of Credit History

    The length of your credit history is another factor that contributes to your credit score. A longer credit history can indicate stability and responsibility in managing debt, while a short credit history can indicate that you are a higher risk to lenders.

    To build a long credit history, it's recommended that you use credit responsibly over a long period of time. You can also consider keeping your old credit accounts open, as closing them can shorten your credit history.


    Managing your credit score is an essential part of financial wellness. By avoiding late or missed payments, keeping your credit utilization low, limiting credit inquiries, avoiding debt settlements or defaults, and building a long credit history, you can maintain a good credit score and increase your chances of being approved for credit in the future. Remember that building and maintaining a good credit score is a long-term process that requires discipline and responsible financial habits. By being proactive and taking steps to improve your credit score, you can set yourself up for financial success and achieve your goals. So, take control of your credit score today, and start building a bright financial future.

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