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15 Things That Hurt Your Credit Score


Your credit score is one of the most important factors of your financial life. Banks use it to decide whether to give you a credit card or loan. Some service providers use it to determine whether you should pay a security deposit. Car insurance providers consider your credit score when setting your insurance rate. While it's important to know what things help you build a good credit score, you also have to know the actions that could hurt your credit score. Here are 15 of them.

1. Paying late

Man with head on table paying bills in home office
Mark Bowden/Vetta/Getty Images
Thirty-five percent of your credit score is your payment history. Consistently being late on your credit card payments will hurt your credit score. Pay your credit card bills on time to preserve your credit score.

2. Not paying at all

Completely ignoring your credit cards bills is much worse than paying late. Each month you miss a credit card payment, you're one month closer to having the account charged off.

3. Having an account charged off

When creditors think you're not going to pay your credit card bills at all, they charge off your account. This account status is one of the worst things for your credit score.

4. Having an account sent to collections

Creditors often use third-party debt collectors to try to collect payment from you. Creditors might send your account to collections before or after charging it off. A collection status shows that the creditor gave up trying to get payment from you and hired someone else to do it.

5. Defaulting on a loan

Loan defaults are similar to credit card charge-offs. A default shows that you have not fulfilled your end of the loan contract.

6. Filing bankruptcy

Bankruptcy will devastate your credit score. It's a good idea to seek alternatives, like consumer credit counseling, before filing bankruptcy.

7. Having your home foreclosed

Getting behind on your mortgage payments will lead your lender to foreclose on your home. In turn, the late payments will hurt your credit score and make it harder to get approved for future mortgage loans.

8. Getting a judgment

A judgment shows you not only avoided your bills, the court had to get involved to make you pay the debt. While they both hurt your credit score, a paid judgment is better than an unpaid one.

9. High credit card balances

The second most important part of your credit score is level of debt, measured by credit utilization. Having high credit card balances (relative to your credit limit) increases your credit utilization and decreases your credit score.

10. Maxed out credit cards

Maxed out and over-the-limit credit card balances make your credit utilization 100%. This is least ideal for your credit score.

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