Six things that will kill your credit score

By FCT

November is financial literacy month and what better way to start it off than by talking credit scores! It affects your ability to get a credit card, finance a car and even take out a mortgage.

It’s so important to build and maintain a good credit score. But sometimes, life happens and you may find yourself trying to catch up on bills and payments. Whatever you do, try not to do these six things that will kill your credit score:
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  • Make late payments or missing payments on any credit products that report to the credit bureau: This includes phone bills, credit cards, loans, lines of credit, etc. This is the number one killer of a credit score. Not paying an account is the single worst thing that you can do to your credit as it will move your account from good standing to a status that reflects you have failed to meet your obligations. If you have disputes over credit or charges, it’s better to pay it off and then pursue it through the courts or through other means versus not paying a bill.
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  • Use your whole credit limit: Using more than 50% of your availability is a credit killer regardless of whether you make your minimum payments on time. Ideally, you should only be using 35% of your revolving credit limit. The exception to this is mortgages and any other installation payment arrangements like cars. These don’t impact your credit score as long as you pay them on time.
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  • Apply for a credit card after being denied: If you get denied, try to work on rebuilding your credit score before applying again. Getting denied for a credit card and immediately applying somewhere else has a significant impact on your credit.
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  • Change employment and residences too frequently: These are major credit factors because it appears that you don’t have stability. In fact, most credit applications want five years of address history, all of which will be reported to bureaus.
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  • Choose a consumer proposal or bankruptcy if you can help it: While this can often help people in financial distress with the month-to-month cash flow, it’s an absolute credit killer. It takes a minimum of three years for you to be considered credit worthy once that trade line hits your bureau. It’s best to explore all options such as: negotiating interest freeze periods, refinancing your home or selling assets before making this important decision.
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  • Let accounts become collection items or judgments: If you have collection agencies reporting on your bureau or someone has recorded a judgment against you, your credit score will suffer. For example, if you haven’t paid a phone bill and the phone company sends the account to a collection agency who reports to the bureau, even if you pay everything else on time, you will likely no longer be deemed credit worthy by a prime financial institution.
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To find out the importance of knowing and maintaining your credit score, check out our earlier blog here.

Categories: Property Owners

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