How Do Your Actions Affect You? 7 Ways to Destroy Your Credit Score

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:

Credit Score
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
Foreclosure
Excellent - 785
785
775
747
727
751
710
Good - 721
676
656
697
688
676
668
Fair - 660
653
636
619
617
614
657
Poor – 558
NA
556
NA
NA
557
528

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
7)      Cosigning

Look out for potential credit pitfalls as diligently and proactively as you work to score points on your credit score.

Have a question for Credit Karma? Post it in the comments or to our Twitter and they'll answer it in next week's post!

Learnvest

Financial planning made simple.

Get your free financial assessment.

Related Tags

Get the latest in your inbox.

Subscription failed!

You're Now Subscribed!