5 Ways to Drop Your Credit Scores Like A Rock

Posted On: March 2011

Editor: Gary Novel

Taking a hammer to your credit is like setting a pile of money on fire. The idea is simple: a low Credit Score WILL cost you more money.

Your FICO (Fair Isaac) Score is the ONLY score you need to concern yourself about, as it is the only score everyone uses. This FICO Score ranges from a low of 350 to a high of 840. The higher the Score, the better the credit risk you are considered, and the LOWER the interest rate you will get. The lower the Score, the bigger the risk you are considered, and the HIGHER the interest rate you will get.

The Credit Score DOES NOT indicate if you have good or bad credit. What it tells you is how you 1) handle your credit, 2) manage your credit, and 3) repay your credit. Even if you are careful on maintaining a good Score, it is still possible to see your Score drop 50-75 points on a single missed payment.

Here are 5 things to be careful about regarding the way you handle your credit:

1) Late Payments - This is one thing that can drop your Scores in a heartbeat. Payment history on your accounts is also a major thing that is looked at in the calculation of your Score. I cannot stress the importance of making ALL payments on time.

2) Revolving Debt - This is very important as credit cards can hurt your scores even if you pay on time. You should ALWAYS try and keep your balance under 50% of what the limit is. The higher your balance is in regard to the limit, the more points you will lose, even if you are making the payments on time. It is possible to lose 10-20 points if you are using a high
percentage on each card.

3) Closing Credit Cards - DO NOT CLOSE ANY CREDIT CARDS!!! This is the # 1 Credit Myth out there. Once a credit card shows up on your report, the damage is done. It is better for your scores to let it sit with a zero balance, than to close it. Using your credit card every 6-7 months, and paying it off helps keep your Scores good, and using it like that will prevent the Bank from closing the account.

4) Inquiries - 1 to 2 inquiries a month is just normal in today's world. You can lose points on your Score with a lot of inquiries in a short period of time. The program takes points from your Score based on the POSSIBILITY that you opened up new credit accounts that are too new to show up on the report. The good news is that you can always recover the points that you lose if you do things correctly in the future.

5) Parking Tickets - I have seen a LOT of these lately. With all cities, towns and villages looking for additional revenue, they are now coming after people with unpaid parking tickets and turning them in to collection agencies that will report this to the Credit Bureaus. That $25 parking ticket
that you ignored now costs about $200, and will show up on your Credit Report as a collection that could take 50-75 points off your Score.

Paying special attention to the above information will keep your Scores healthy and as high as possible.

For all your credit-related questions, contact Gary Novel, President of Kreditguru, Inc at 630/624-9557 or kreditguru@aol.com

Posted On: March 2011

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