Your credit score isn’t just some meaningless number on a piece of paper, it has the ability to impact your day-to-day life in more ways than you think—which is why having a healthy credit score is so important.
We’ve talked a lot about the ways to maintain your credit score (things like making on-time payments and fixing errors on your credit report), but what about the things that actually lead to a lower score to begin with? Here are eight things that can have a negative impact on your credit score:
1. Late or missed payments
If you are late or miss a credit card, rent, utility, phone bill, or loan payment, it can have a negative impact on your credit score. Credit reporting companies will be notified, which can drop your score.
2. Unpaid tickets
That unpaid parking ticket might end up costing you a lot more in the long run if you let it go to collections. Pay your tickets on time to avoid having the debt listed on your credit report where it can stay for up to seven years.
3. Too many credit inquiries
Having multiple credit inquiries in a short period of time can knock your score down a few points. It should bounce back within a few months but try to avoid applying for credit too often.
4. Errors on your credit report
If you have an error on your credit report, like incorrect contact information or an incorrect payment date, this can lower your credit score. It’s important to check your report for errors and contact the credit reporting bureau as soon as you see something that looks off. You can learn more here.
5. Poor credit mix
Having a good credit mix, or a variety of credit types, impacts about 10% of your score. If you only have one type of credit on your report, your score could suffer due to lack of information. Aim to have a healthy balance of credit types, but don’t go opening accounts you won’t use.
6. Bankruptcy
This has the biggest impact on credit scores. Declaring bankruptcy can lower your score by up to 240 points and will stay on your credit report for up to 10 years.
7. Home foreclosure
If your home goes into foreclosure, it can drop your score by up to 160 points. A deed in lieu or a short sale can help in this situation, but will still lower your score by up to 125 points.
8. Maxing out a credit card
Credit utilization (remember that term?) accounts for a good portion of your credit score, so it’s important to keep your utilization ratio low. Experts recommend using under 30% of your available credit at any time. If you max out your credit score, you could see your score lowered by up to 45 points.
