What mistakes ruin your credit score?

Make only minimum payments with your credit card. Apply for multiple credit cards at once. However, many don't know that applying for a new credit card only hurts a little, unless you do it multiple times in a 12-month period. And if five different potential mortgage lenders access your credit report within a 30-day period while you search for the best interest rate, that's considered just a credit check or a difficult decision.

Filing for bankruptcy has a significant impact on your credit rating and generally costs 100 points or more, according to FICO. In addition, bankruptcy can stay on your credit report for up to 10 years. If this happens to you, remember that there is life and credit even after bankruptcy. A foreclosure can cause your credit score to drop by more than 100 points and remain on your credit report for up to seven years.

Payment history represents 35 percent of your FICO score. According to a FICO simulation, a 30-day late payment can cost a person with a FICO 9 credit score just over 790 points, up to 80 points. Not making a payment for 90 days can be even more damaging, as it reduces a credit score from 790 to 660, which is below FICO's “Good” range. A late payment can stay on your credit report for up to seven years.

Collection occurs when a creditor sells its outstanding debt to a third party or hires an outside company to collect payment. A “cancellation” refers to when a creditor removes an unpaid debt from its books, usually when it is 180 days late in its maturity. The newer a collection account is, the more it will hurt your credit rating. Charges can stay on your credit report for up to seven years.

Credit utilization represents 30 percent of your FICO score. The lower your balances relative to your total available credit, the better your score. In the FICO example, a person with a score of 793 could see it drop to 665 if they exhaust their credit card limit. If you apply for multiple cards over the course of a few months, the loss of points due to multiple difficult inquiries add up.

It can also give lenders the impression that you're desperate to get credit. FICO states that consumers with six or more inquiries may be up to eight times more likely to file for bankruptcy. If you want to maximize your credit rating, it's best to have a combination of credit cards and installment loans. The combination of credits represents 10 percent of your FICO score.

If you currently have a debt-to-credit ratio of 50% (or more), you won't have a good time with your overall credit rating. Credit lenders don't want to give you new credit if you have exhausted cards or are about to run out of the maximum limit. Instead, it would be better if you used between 10% and 30% of credit. Many people get credit cards at age 18 or earlier with a co-signer, but that's not always the right way to do it.

Amy Fontinelle has more than 15 years of experience in personal finance, corporate finance and investments. If you've recently opened several new credit card accounts, this could indicate that you're planning to spend a lot in the near future. This means that you may not be able to pay the monthly mortgage payment that the lender has estimated you can make. FICO scores only take into account your history of difficult inquiries and new lines of credit over the past 12 months, so try to minimize the number of times you apply for and open new lines of credit in a year.

However, searching for rates and multiple queries related to car and mortgage lenders will generally be counted as a single query, since consumers are supposed to be looking for rates and don't plan to buy multiple cars or homes. Even so, keeping your search to less than 30 days can help you avoid hurting your score. Your credit rating is important for getting loans approved and getting the best interest rates. Different ratings take into account different factors, but the most commonly used score, FICO 8, places more importance on credit utilization and payment history.

It also takes into account the length of your credit history, whether you've recently opened new credit, and your credit mix. For example, not making a credit card payment is bad, and keeping card balances low relative to the total available credit is good. To qualify for a FICO score, you must have at least one credit card or loan account that has been open for six months and that has been reported to credit bureaus in the past six months. In addition, that credit score can help potential lenders better understand your credit history, which will be crucial for any financial institution considering lending money.

A thorough inquiry occurs when a lender draws your credit report for review when applying for a loan or credit card. Lenders can't determine what to lend you based on what you can do, but they can use your credit score to assess the credit risk you might face. Each of the credit reporting companies may have different information in their credit report, so you should request your report from each of them. The FICO 8 score takes into account your credit utilization ratio, which measures the amount of debt you have compared to your available credit limits.

Credit cards that you may have problems with, related to late payments or even collections, could damage your credit report for seven years. Your credit rating shows whether or not you have a history of financial stability and responsible credit management. The last thing the FICO formula considers in determining your credit score is if you have a combination of different types of credit, such as credit cards, store accounts, installment loans and mortgages. See more resources on credit reporting for information on how you can improve and protect your credit history.

The FICO score is the most commonly used credit score, specifically the FICO 8 score, but there are other credit scores, such as the VantageScore. .

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