How Do Your Actions Affect You? 7 Ways to Destroy Your Credit Score
You know by heart the key points—pay on-time, use credit wisely, have a diverse mix of credit—to build healthy credit and watch your credit score climb. But do you know the big what not to-dos to avoid at all costs, and how they will affect you?
We asked 4 Credit Karma users, ranging from excellent to poor credit, to use the Credit Simulator to predict how much their score would be negatively impacted by the following financial mistakes. Check out how drastically your own credit score range would be affected by the following scenarios:
Close your oldest credit card
Increase balances by $5,000
Allow one monthly account to become past due (30 days)
Allow one monthly account to become past due (90 days)
Have an account go into collections
Excellent – 785
Good – 721
Fair – 660
Poor – 558
Due to the way credit score models are algorithmically calculated, higher credit scores are disproportionally affected by negative financial actions. For example, foreclosure will knock 30 points off a poor credit consumer, while foreclosure would blast 75 points off an excellent credit consumer’s credit score. The higher your credit score, the harder you fall.
The lesson here is to avoid getting these marks on your credit report at all costs. Your credit score can’t afford any slip-ups; even one late payment will damage your credit. Here is Credit Karma’s blacklist of destructive habits that bomb your credit score and will upset your chance at future financial opportunities.
1) Declaring bankruptcy
2) Foreclosure and short sale
3) Paying late and defaulting
4) Max out your credit card or run up large balances
5) Closing your oldest credit card
6) Applying for too much credit
Look out for potential credit pitfalls as diligently and proactively as you work to score points on your credit score.