When growing and strengthening your credit profile, knowing what damages your credit score will allow you to avoid these types of common mistakes.
Your credit score is something that affects every area of your life, whether you know it or not. It is always best to be proactive when it comes to managing your credit. Managing your credit is more than making payments on time, it includes knowing what matters to your credit score, paying attention to your credit report and taking the steps to ensure your information is correct.
How Your Credit Score is Determined
Understanding a little more about how your credit score is determined will shed some light on what can cause damage. Remember, there are 5 factors that FICO and Vantage Score use to come up with your score:
- Payment history (how you pay your bills)
- Credit life (how long you have had a credit file)
- Credit usage (how much of your available credit you are using)
- Credit mix (what is your unsecured to secured debt ratio)
- Inquiries (how much and what kind of credit you have been looking for recently)
Anything that affects those five factors will have some sort of impact on your score.
Negative Items That Lower Credit Scores
Below is a list of items that you want to be fully aware of in order to prevent damage to your profile:
- Paying a credit card late
- Forgetting about a bank account with a tiny balance
- Closing a credit card account without reason
- Opening too many store credit cards
- Blowing off parking tickets
- Not paying income taxes on time
- Losing track of unpaid utility bills
- Not paying fines
- Cosign on a risky auto loan with a child
- Errors on a credit report
Some of the things on the list are no brainers, you know that late payments are extremely detrimental when you are trying to preserve or increase your credit score but that is not the only activity that is going to put a dent in your score. Parking tickets, library books and old unpaid utility bills damage your profile. Most important item to watch out for is, inaccuracies and errors as they can and will severely hurt your score. Basically, any company that you owe money to can be a threat to your credit score.