Your credit score is comprised of several different factors, and here are 9 ways to lower it. Of course, the intent here is to show you what NOT to do.
1. Late payments.
The majority of your score reflects your ability to pay back money you owe to lenders. This makes sense and is the primary reason your score will go down.
2. Ignoring payments completely.
Giving your lenders at least some small token payments each month is better than giving them nothing at all. If you ignore them for several months, your account will be charged off, which looks much worse.
3. Charge offs.
When you don't pay on an account for about six months or more, the company will decide to "charge-off," meaning they think the debt is uncollectible for tax and accounting purposes only, but you still owe the money and they will then most likely send it to collections or try to sue you to get it.
4. Collections.
This is coupled with charge-offs. When the company gives up on you, they will sell your debt to a collections agency. Needless to say, both of these drop your credit score quite a bit.
5. Judgements.
In some cases, a collection agency may decide to sue you to have your wages garnished or items repossessed, or other nastiness. If they win, this is called a judgement and will hurt your score.
6. Bankruptcy.
This will stay on your report for longer than other items (10 years instead of 7), and will make your FICO score drop sharply. However, in some cases you should consider it, if you are in outrageously bad debt; even before the 10 years are up, your credit will begin to improve.
7. Foreclosure.
Similar to bankruptcy, if you fail to pay your mortgage payments and the bank decides to foreclose on your house, your score will be negatively impacted.
8. Maxed-out credit cards.
The more you owe compared to how much credit limit you have, the lower your score. So try to either pay down your debt, or have a few cards that you don't use to keep your total credit limit high compared to your debt.
9. Shutting down and old card.
Long credit history is important. If you've had a card for awhile (even if there was inconsistent payment history on it) and you finally got out of debt, you may be tempted to call up and have the account closed. Don't do it! Once you pay off a card, just slice it up, or hide it, or whatever you need to do to keep the actual account still open along with all it's history.
So increasing your score can be fairly straightforward, if you break it down in the above fashion. But cleaning up your credit report can be a hassle. I suggest you follow the advice here on this site, or try one of the few legit credit repair services. |
