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Credit Score Destroyers

7 Credit Score Destroyers

Your credit score not only determines whether or not you can get a credit card. mortgage, or auto loan, it’s also a critical factor in determining the interest rate you have attached to those items. A low credit score can cost a lot of money over your lifetime.

Not everyone is aware of the many factors that determine a credit score. It’s easy to make assumptions that seem logical, but are actually false. Acting on incorrect beliefs is a sure way to make a critical mistake.

Save money and make your financial life easier by avoiding these seven credit destroyers:

  1. Carrying a big balance on your credit cards. While having a lot of debt is never a good idea, using more than 30% of the available credit on your credit cards hurts your credit score. For example, if your credit limit is $10,000, your score drops if your balance is over $3,000. This is commonly referred to as the “utilization ratio”. Keep yours under 30%.
  1. Paying late is a huge factor in your credit score. Experts estimate that 35% of your credit score is determined by your payment history. Any late payments will lower your score. 
  1. Closing credit cards is a credit score killer. This is related to your utilization ratio. By closing a credit card. you lower the amount of credit that’s available to you. Your credit score is also sensitive to the length of your credit history.
  1. Defaulting is an obvious credit score mistake. When you fail to pay back a loan you owe to a lender, you can lose as much as 100 points from your credit score. Make every effort to pay back your loans. If you are struggling. contact the lender and attempt to make other arrangements. They can be very flexible if failing to do so means not getting their payments.
  1. Applying for too much credit. Everyone needs to have some credit, but applying for too much has a negative effect on your score.
  2. Each time you apply for more credit, your potential lender makes an inquiry of your credit history. Each of those inquiries lowers your credit score.
  3. Avoid sending in every credit card offer that shows up in your mailbox.

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We ask your creditors to verify the negative items they are reporting. If they can’t, they are required to stop reporting them.