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The Top 4 Credit Killers and How to Avoid Them
You don’t have to have a perfect credit score. Few do. Yet having good credit is important for getting good interest rates on credit cards, mortgages, and vehicle loans. Employers look at credit scores, too, when making hiring decisions. Even if you have a suboptimal credit history, you can boost your credit score by avoiding these credit killers.
Top 4 Credit Killers
- Serious delinquency. Old accounts that have been on your credit report for a long time are the number one credit killer. Credit bureaus will assume (algorithmically) that you do not care enough about your credit to fix small problems. A three-year-old $75 LabCorp debt can drag your credit down by 100 points or more. This is why it’s important to routinely monitor your credit report and promptly address credit items.
- Recent missed payments. Everyone misses a payment at some point. You may have been on vacation, or you may have changed card numbers and auto-bill didn’t transfer correctly. But realize that recently-missed payments count more against you than old missed payments. Avoid them if you can. If you do miss a payment, bring it current immediately. And in the future, if you are unsure whether you’re going to be able to make a payment, contact the lender. See if there’s some sort of forbearance they can offer. Try to get them to delay credit reporting for 30 to 60 days.
- Bad payment history. Fixing a bad payment history is a two-step process. First, you must fix the items on your credit report in which you missed payments. Either get back on track by making at least three months of timely payments, or just pay the account off completely. Second, you must replace that bad history with good history. This means adding a newer credit account to replace that old account. Of course, you must stay current on new accounts, as well, for this technique to work.
- High credit usage. The availability of credit can account for as much as 30 percent of your overall score. The trick here is to obtain — but not necessarily to use — as much credit as possible. Having credit in reserve is considered a positive attribute by the credit bureaus. If all of your credit is maxed out — not so much.
Wipe the slate clean
If you have multiple credit killers on your credit report, consider getting a fresh start with bankruptcy. Although a bankruptcy filing will definitely impact your credit, it also eliminates your debts and addresses all the credit killers on your credit report. If you have many creditors or deep debt, discuss your bankruptcy options with an experienced attorney.
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