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