A graph of a credit score dropping.

These Things Are Killing Your Credit

Is your credit score in the gutter? Are you struggling to figure out why? Here are 5 things that are killing your credit rating. A few of them might surprise you.

Credit Killers

Your credit rating should really not be a mystery. It is a simple mathematical score based on a number of factors. Still, many people are clueless as to what is causing their score to tank. If you are one of those people, we can help.

Take a look at 5 of the biggest factors that are killing your credit rating.

1) Late Bill Payments

One third of your credit score is on time bill payments. If you have a 30 or a 60 day late payment on your credit score, it is dragging you down in a big way.

How to fix it.

You can recover from a late bill payment, but it will not happen overnight. Start making your payments on time and, going forward, your score will improve.

Late payments caused by forgetfulness can be addressed by taking advantage of all the tools at your disposal. Automatic payments are the most effective tool that you can use. It completely takes the guesswork out of paying your bills on time, but it can feel a bit invasive for some. If you feel this way, payment reminders can also be almost as effective. Just make sure that you act on your reminders as soon as you read them. It takes discipline.

If your late payment was caused by a lack of funds, it may be time to adjust your budget. Look at places where you can make some cuts and trim the fat to make your expenses more manageable. When you make your budget adjustments, be sure to allocate money for an emergency savings.

2) Charged Up Credit Cards

We get it, why have credit if you never use it?

The problem is that the more of that credit that you use, the more creditors think that you are in trouble. It implies that you do not have cash to pay your expenses and are turning to your credit cards to make ends meet. High credit card utilization is one of the biggest things that can kill your credit.

How to fix it.

To reverse the damage done by high credit card usage, you need to pay those balances down. The great thing is that as soon as you pay those balances down, your score will rebound. There is no waiting period.

Of course, paying down those credit card balances can be difficult, but you can do it. All that you need is a plan and the motivation to take action.

By far the most common plan put into effect is the Debt Snowball method. Simply organize your cards by balance and pay as much as you can on the lowest balance card. On the rest, pay the minimum. The idea is to get a card paid off ASAP, which will motivate you to continue. Paying off that 500 dollar card is much easier than paying off one with a balance of 2500 dollars. Once you get that first card paid off, move on to the next lowest balance cards and continue the process until your credit card debt is in check.

Ideally, you should be using less than 10 percent of your available credit. This is not an all or nothing number though. As you get closer to this goal, your score will increase in increments.

3) Mistaken Information

The credit bureaus are certainly not perfect, and when they make a mistake, it is your score that pays. You might be surprised at the mistaken information that can find its way to your report. Anything from a wrong address to a false bankruptcy to a 10,000 dollar judgement. The sky is the limit.

How to fix it.

Fixing credit report mistakes is a simple process, but it is on you to take care of it.

You are entitled to one free credit report every year and another one any time you are denied credit. Order a report from each credit bureau and then scan it carefully for errors. If you find any mistaken information, write to the offending bureau and explain the problem. They then have 30 days to investigate. If they can not prove that the information is accurate, it must be removed.

4) Too Many New Accounts

New accounts can hurt you in several ways.

For starters, they can signify to creditors that you are having money problems and are opening multiple accounts in order to pay your bills. Second, new accounts will lower your average age of your credit. In either case, too much new credit will cause your score to dip.

How to fix it.

This is something that only time can fix. If you made the mistake of opening up too much credit, keep the accounts but stop applying for anything new. Over time, your credit rating will return to where it was.

5) Fresh Credit Inquiries

Just like with new accounts, inquiries can have a negative impact on your credit. They signify to lenders that you are applying for and may have opened new credit accounts.

How to fix it.

Stop applying for new credit going forward and those fresh inquiries will stop affecting you in a matter of months. While they stay on your report for 2 years, they no longer have an impact after a 12 month period.

If you have to apply for new credit, like a car loan, make all of your inquiries at once. Multiple inquiries over just a few days will impact you less because creditors know that you will be shopping for the best rate.

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James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.