Alfred Erickson Garcia

Your credit score is an important reflection of your financial habits and it’s extremely important for you to understand what it means. It gives banks and other lenders an idea of how trustworthy you are with repaying your loans, so a poor credit score can lead to a plethora of financial problems. A credit score is a 3-digit number between 300-850, and it’s basically your credit history expressed as a number.

The higher the score, the better, and the more likely you’ll be approved for new lines of credit, such as home loans, credit cards, or business loans. You want to make sure you pay close attention to the numerous factors that can hurt your credit score.

Here are the 7 most important things that can harm your credit score:

1. Late Payments

Even just one single late payment will affect your credit score. Your payment history is the most important factor that makes up your credit score, so it makes sense that a single late payment will start to lower your credit score. You definitely want to keep track of when ALL of your bills are due, not just credit card or mortgage payments. Late payments for bills like utilities, water, internet, or phone will also harm your credit score.

2. Frequent Hard Inquiries

Applying for new lines of credit require a hard inquiry, which is basically a background check that a lender makes on your credit history(landlords or employers may also conduct a hard inquiry for new applicants). Hard inquiries temporarily lower your credit score because it signals that you are seeking out to borrow money, and lenders will take this into consideration before approving your new loan. If you apply too often and have multiple hard inquiries in a short time span, this is a red flag and it’ll affect your credit score. Be sure to take this into consideration and do your research before applying for new lines of credit.

3. Defaulting On Loans

You default on a loan when you fail to make payments on debt that already exists, so if you are constantly late on paying your bills, you risk the chance of defaulting on your loan. Certain lenders will report you to debt collections even if you are late on one payment, although it usually takes a few missed payments. Defaulting on a loan will hurt your credit score by a lot, and can stay on your credit history for up to 10 years.

4. Bankruptcy

Filing for bankruptcy happens when you have more debt than you can pay off, and have no other way to get out of it. If you file for bankruptcy, it can help you out of some debt and stop collection agencies from contacting you, but it will drastically hurt your credit score. Filing for bankruptcy is a last resort situation since your credit score can drop by a whopping 200 points.

5. Canceling 0 Balance Credit Cards

It might seem a bit counterintuitive, but canceling an already existing credit card account with a 0 balance will hurt your credit score. By canceling the card, it will lower your overall credit amount which drops your credit utilization ratio, and the age of your credit history will be shorter. It’s best to keep the credit card account open even if you paid off all the debt.

6. Co-signing Credit Applications

If you are in good credit standing and have decided to cosign a credit application with a family member or friend, it can negatively impact your credit score depending on the other individual’s credit standing. By co-signing, you are agreeing to take responsibility for another person’s debt. If they can’t pay, your credit score takes the hit and you’ll end up having to pay off their debt as well.

7. Having High Balances On Your Credit Cards

If you are consistently maxing out your credit cards or having high balances close to your limits, then your credit score will drop. This is because high balances will increase your credit utilization ratio, which is the proportion of your total debt to total credit limit. You want to keep your credit utilization ratio around 30% or lower.

There are a lot of factors that can negatively harm your credit score, and they can easily be missed if you aren’t paying close attention to your credit. You want to be frequently checking your credit score, and each year you are entitled to an in depth credit report from the three credit reporting bureaus: Experian, TransUnion, and Equifax. There are other free websites like or that will provide you credit reports as well.


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