It is essential that you have a good credit score. Your credit score not only determines whether you can finance both large and small purchases, like a home, car or even a computer—it also determines your interest rate on these loans. A low score may prevent you from buying the things you want and need or may cause you to pay much more in interest. You may be doing some things now that you don’t realize are lowering your credit score. Read on for five things that will damage your credit.
1. Late or Missed Bills
If you are late on your monthly bills, such as your utility and mortgage, you may be damaging your credit score, along with accruing late fees. Failure to pay a bill may result in a company reporting you to a collection agency, which can severely lower your score.
2. Charging Too Much
While having a credit card open for a period of time and making consistent payments can help your credit score, running up a balance on your credit card can have damaging effects, especially if you cannot pay that balance quickly. Even requesting a credit limit increase can negatively affect your score. You should only charge what you can pay, and ideally, you should pay off your card each month.
3. Missed Tax Payments
If you don’t pay money that you owe to the IRS, that is reported on your credit score. This can lower your score, especially if you let it go too long.
4. Closing Out a Credit Card
Surprisingly, closing a credit card is a bad thing for your credit score. Proving that you have available credit and can consistently pay it off on time actually helps your score. You should have a couple of forms of revolving credit to help your credit score. You do not need several cards, nor do you need to run up a large balance.
5. Filing Bankruptcy
If you are in serious financial trouble, filing bankruptcy may seem like a good idea, but you should only use it as a last resort. All of your accounts will be closed, and your credit score will plummet. Look into all of your other options before filing bankruptcy.
By avoiding these costly mistakes, you can keep your credit score intact. You can also make wise decisions to help raise your credit score. When it is time to make a big purchase, you will be pleased with the amount of money available to you and the lower interest rate.
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