The Main Threats to Your Credit Score

Your credit score is a very important three-digit number that tells lenders and creditors about your financial responsibility. There are certain things that can do damage to your score- read on to find out about the main threats to your credit score, and how to avoid them.

*Making late payments. Your payment history comprises roughly thirty five percent of your credit score, and frequently missing payment dates will adversely affect it. To avoid: pay your card bill on time (and it is a good idea to pay more than the minimum amount).

*Not paying the bill at all. Even worse than making a late payment is to ignore your credit card bill completely. Every month that you do not pay, you get closer to having a charge-off. Even if you can only pay the minimum, you should do it, as the minimum is better than nothing.

*Having a charged-off account sent into collections. Creditors often hire debt collection agencies to get their money, before or after it is charged off. An account in collection status signifies that the creditor has given up on trying to collect from you, and has hired another entity to do the dirty work.

*Filing for bankruptcy will severely damage your credit score. It's advisable to exhaust every other avenue, like credit counseling services, before you file for bankruptcy. It should be used only as a last resort.

*Almost as bad as a bankruptcy is to get behind on mortgage payments. If you get too far behind on your mortgage, your lender will foreclose and you will lose your home! The missed payments will damage your credit score and make it next to impossible to get a mortgage in the future.

*Having judgments against you is very detrimental to your credit score. Judgments not only show that you tried to skip out on paying your bills, but that the court had to force you to pay. While any judgment hurts your credit score, a paid one is better than having one unpaid.

*The level of debt is the second largest component in your credit score; specifically, your debt to credit ratio. Carrying high credit card balances in relation to your available credit heightens your credit utilization and damages your credit score.

*Maxing out cards and putting them over the limit is also a fast way to use up all your credit (and to damage your all-important credit score).

*Closing credit cards that still have balances can negatively impact your score. When you do this, your credit limit goes to zero and your balance remains the same. This is the same as maxing out your card.

*Fifteen percent of your credit score is your credit history's length (the longer it is, the better). Closing out old cards, even if you no longer use them, will make your history look shorter than it really is and it also reduces your debt to credit ratio.

There are so many things that can impact your score negatively, that it can be hard to avoid them all. By knowing what to look out for, you can avoid common credit pitfalls and keep your score high.