Seven Things That Can Damage Your Credit Score

Understanding what’s causing your bad credit score

In order to o fix your credit score, you first must know what’s on it, what it means and why it’s having a negative impact. Make sure you get a free copy of your credit report and go through the various items to see what’s dragging down your score. It is also important to have your credit report so that you know who owns the debt and who to contact to negotiate and dispute potential inaccuracies.

Items that could have serious long-term impacts on your credit

1. Delinquency – If you’re payment on a loan or credit card is 30 or more days past due, lenders will report to credit agencies that your account is delinquent. Length of time on your credit report: Averages around two years

2. Charge-off – Around six months of missed loan or credit card payments can result in your account being deemed “non-collectable” and is “charged-off” from the account. Length of time on your credit report: Seven years

3. Debt collections – Collection accounts may show up on your credit report and/or the original creditor may place a note on your report indicating the account is in collection status. Length of time on your credit report: seven years.

4. Bankruptcy – A Chapter 13 Bankruptcy is a plan that’s developed to repay all or part of your debts (7 years). A Chapter 7 Bankruptcy discharges all your debts (10 years). Length of time on your credit report: seven to 10 years.

5. Foreclosure – Defaulting on your mortgage by failing to make the loan payments. Length of time on your credit report: seven years.

6. Tax liens – Unpaid tax liens from unpaid property taxes.Length of time on your credit report: seven years.

7. Lawsuits or judgments – If a creditor takes you to court for a debt and a judgment is entered against you.Length of time on your credit report: seven years.

Quick Tip

Have you experienced one or more of these situations? There’s help! Visit Ent’s free and confidential financial counseling partner, GreenPath, for more information on how they can help you with free debt counseling or debt management plans. For more tips and financial education visit the Education Center.

Other factors that could be hurting your credit score

Maxed out account/not enough credit – Using too much of your available credit is a cause of low credit scores that can be fixed quickly. To combat this, you want to pay down your existing loans as much as possible to get your credit utilization ratio to around 10%-20%. For example, if you have a credit card with a $5,000 maximum line of credit, you want your outstanding balance to be no more than $1,000 or 20%.

Another way to improve your credit utilization ratio is to have more credit available to you. This does not mean that you should open a bunch of credit cards, because that can actually hurt your score. What you could do is ask your lender for a credit limit increase for your existing lines of credit. This would increase your overall credit limit without opening new accounts, which in turn lowers your utilization ratio and improves your score. Make sure to ask your lender if increasing your line of credit will cause a “hard pull” on your credit report, which could lower your score. And finally, don’t try to increase your limits on multiple cards at once.

Note: Increasing your lines of credit may not be a good strategy if you already have a lot of late payments, or you tend to overspend. You don’t want to increase your credit limit, just to get into more debt.

Identity Theft Inaccuracies – It’s very important to check your credit report for suspicious activity that could have been caused by a malicious person trying to steal your identity. Make sure you’re checking your credit report for inaccuracies (credit pulls that you didn’t initiate or authorize, accounts that you didn’t open) at least once a year and check your credit card statements at least once a month. If you see any items on the report that could be from identity theft, contact your lender and have them removed.