Here’s How to Ruin Your Credit Score (These Are Proven Ways)

Here’s How to Ruin Your Credit Score

What is a credit score you ask? Well, basically, it determines how likely lenders are going to let you get a loan.

Know that different lenders have their own standards for rating credit scores, but 700 and higher (on a scale of 300 to 850) is generally considered a good credit rating or score.

If you’ve got a bad one, it will follow you wherever you go.  Whether you are applying for a home loan, opening new lines of credit, or venturing into a new investment, your ability to obtain credit is incredibly important.  Even small, seemingly arbitrary decisions can affect your credit score.  

It is important to take good care of your credit score, especially if you are planning to become an entrepreneur someday (you might probably need a big loan to fund your business at the onset, right?). You don’t want a constantly declined loan application, right?

Or, maybe you are looking forward to a house loan when you reach 30 and start building a family. A declined house loan sucks.

But such is the price of having a bad credit score.

In order for us to avoid a bad credit score, we’ve listed a few terrible habits people make that hurt  their credit.

1. Paying credit or loan payments late

While this mistake is obvious, almost everyone makes it once.  One of the main factors that a credit agency uses to determine your credit score is your past payment history. In most cases one or two late payments on your credit cards, loans, or other credit obligations will not significantly damage your credit record. But if mistakes add up, they will count against you.

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2. Spending to your credit limit

A large portion of the calculation that contributes to your credit score is the debt utilization ratio.  You debt utilization ratio is simply the amount of available credit you are using.  If you are running up credit card debt above 50% of your limit, your credit score begins to be affected.  Keeping your debts between 10-30% of your limit is advised.

3. Racking up credit card debt early in life

Most people get their first credit card while they are students in college.  Getting a good start to your credit history is important, but many fall victim to poor spending habits and maxed-out credit cards. Little do they know that past credit history usually counts for as much as 35% of your credit score. Missed and late payments will stay on your record for as long as six years, when most people are starting to apply for loans for graduate school, a car, or a house.  Falling into a debt trap when you’re 19 years old makes it much harder to get lines of credit later in life.

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