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Top 3 Credit Mistakes Which Will Harm Your Credit Scores

Credit scores are the financial measurement to determine your financial

creditworthiness. Lenders like banks and credit card companies use these

credit scores to know your financial ability. That’s why it is important

to maintain your good credit scores. Let’s review the 3 top credit

mistakes that can harm your credit scores:

1. Missing a Payment

One of the ways your credit score is calculated is your payment history.

Many lenders will use this piece of information to predict your future

missed payment probability and it is an important factor when come to

approving a new loan. There are three ways that missing payments will

hurt your credit scores. They are:

How Frequent are Your Late Payments?

Sometimes you may make your payment late due to your busy schedule. But

if you do it frequently, it may hurt your credit score seriously. Don't

make the late payment as your habit; maintain your good credit behavior

with your timely payment.

How Recent are Your Late Payments?

The scoring models are designed to predict how you are going to pay your

bills in the subsequent 24 months; your recent late payment records

especially with the last 2 years weight a lot in your credit scoring. If

you have a lot of late payment records in your past 2 years, it is

predicted that you will likely to miss more payment in the next 2 years.

As such, your score will suffer.

How Severe are Your Late Payments?

The severity of your late payment also plays a big part in your credit

scores. The 90 days late payment hurt your credit score more if compare

to 14 days late payment. Try your best to make payments on time and not

let the account go in to charge off status. Many lenders will work with

you in order for you to bring your account current.

2. Settling your debt with your creditors with less than than the amount you owe

This can create negative information on some scoring models. This is

called deficiency balance & quote in your credit report. This may happen when you have unbearable debt and you hire a debt consolidation service

to negotiate with your lenders to outcome an agreement to settle your

debt with some reduced amount.

3. Over Utilization of Your Available Credit Card Limits

Your credit scores can be affected with your high balance on your credit

card. Overutilization is the practice of running up balances too close

to your credit card limits. For example, if you have a Visa card with a

credit limit of $10,000 and a $5,000 balance you have a utilization

percentage of 50% because you are using 50% of your credit limit. The

higher the utilization percentage the fewer points you will earn for your

credit scores. If paying your cards off every month is unrealistic then

try your best to keep that percentage as low as possible to maintain your

good credit scores.

Try your best to avoid the above credit mistakes to keep your credit in

good standing.


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