---

Guest post by: Dustin Bower Become an Author

Tweet

---

---

Credit scores are fickle and hard to predict. Credit scores are determined by analyzing credit records and are supposed to show a person’s creditworthiness. Since the score uses so many different factors, it is impossible to know for sure how much an action will raise or lower your score. Different actions will impact your score in different ways, and those ways can change based on your current score.

Here are some of the more common ways to sink your credit score:

Maxing out a credit card:

It does not matter if you leave the bill unpaid or pay it back immediately: maxing out a credit card will drop your credit score. This is because maxing out a card is a sign that you are not doing well financially. Depending on the situation, you could lose anywhere from 10 to 45 points from your score this way. This is not that big of a drop, but it is still worthwhile to check your credit limit often so that you do not exceed it.

Missing a payment cycle:

Being late a few days is not as big of a deal as missing a whole payment cycle. Missing a month of payments can drop your score from 60 to 110 points. Along these same lines, be careful when you use a credit collection agency to try to repay your debt. It is alright to deal with collection agencies, but you need to be careful about the repayment plan. If your debt mounts over several months, you might be penalized for missing payment cycles.

Foreclosure:

Foreclosures are a painful experience. When you lose your property to a foreclosure, it can mean a credit score dip of 85 to 160 points. Going through a foreclosure means that mortgage lenders are less likely to lend to you for up to four years. Once you rebuild your credit, it may be easier to get another mortgage.

Bankruptcy:

Bankruptcy cuts into your score the hardest. Filing for any type of bankruptcy could lower your score from 130 to 240 points. However, do not discount bankruptcy just because of the hit to your credit score. A credit score can always be rebuilt. If you find that you cannot pay bills and that the debt is piling up, chances are your credit rating is pretty low anyway. Bankruptcy is not meant to be a punishment, but instead a bastion to help you get back on your feet.

Rebuilding your credit:

Here are some methods to consider when you begin to rebuild your credit:

Pay your bills on time- This is the best way to rebuild your credit. Your credit score is a measurement of your creditworthiness, so it only makes sense that paying your bill you demonstrate your creditworthiness and raise your score.

Reduce your reliance on credit cards- If you are not using your credit cards for everything then it shows that you are less likely to overspend and it shows that you are not reliant on your credit.

Have a mix of credit forms- Mortgages, personal loans, auto loans, credit cards, and lines of credit are all good to have, if you can maintain them. Having and maintaining these various credit lines shows your reliability.

Avoid closing accounts- If you close your credit accounts, it can lower your score because it sends signals that you cannot handle the credit account anymore. Do your best to maintain a healthy balance, or have no debt on the card at all if you can manage it.

Do not apply for new credit accounts, or only sparingly open a new one- If you open too many accounts, it sends signals that you cannot make due with the amount you have and that you are not reliable with the credit you have.

Related Articles

  What affects your credit score?
  Seeing Your Free Credit Score
  To Successfully Obtain Business Capital Every Business Needs A Coach
  Business Credit Cards versus Personal Credit Cards
  Mortgage Rates Canada - How Credit Scores Affect The Rate You Get?
  Best Leasing Rates in Canada via a Leasing Specialist
  Raise Credit Scores: Raise FICO Score Product Review
  How Will Debt Settlement Affect my Credit
  9 Vital Principles of Communication
  Vendor Credit Lines Are Essential To Any Business Seeking Financing
  Why A Good Credit Score Is Important To Your Business
  I Want To Improve Your Credit Score, But You Won't Let Me Help!
  Replenish Your Attitude
  Build Corporate Credit for Your Small Business
  Improving Indoor Air Quality
  9.2 Barriers to financing women entrepreneurs: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
  Buy Real Estate Clean Up Credit Report One More Oil Well
  How Music Affects Employee Performance
  Should I use personal credit to fund my business?
  Improving Credit Score - Good Credit is Essential to any Business

Related Forum Posts

Re: SEEKING PRIVATE OR ANGEL INVESTOR
Re: Interrealtionship between financial statements

Share this article. Fund someone's dream.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Small Wins, Quick Success

Profit from the Plateau

Fail to Plan, Plan to Fail

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.