Having a good credit score can help you in many ways. It can help you qualify for a lower interest rate on a car or home loan, and can lead to better rates on credit cards.
A poor credit score can do the opposite, and there are plenty of ways to do that. Here are four of the worst things to do to lower your credit score:
Late payment hurts credit score
In the mix of a busy life, it can be easy to forget to pay a bill once in awhile. A late credit card payment, however, is something you don’t want to forget.
A high credit score of 780, for example, can drop by 100 points if you’re 30 days late in payment just once, according to FICO, the credit scoring agency. With a high score, one mistake such as a late payment can be the first sign of a risky behavior and can be a bigger credit score hit than it would be for someone with a lower score who has already been hit for risky behaviors.
Being one or two days late on a credit card payment won’t affect your score, though you’ll probably have to pay a fee for being late.
Foreclosure or bankruptcy
Avoiding foreclosure on your home or avoiding bankruptcy is preferable for many reasons, and a credit card score may be the least of your problems if you’re in either of these situations.
Ultimately, they’ll affect your credit score. An score will drop by 200 or more points in two of the worst things you can do to hurt your credit score.
Max out credit card
Using all of the available credit on a credit card can hurt you credit score in many ways. Maxing out all of your cards can be a disaster.
Using that much credit is a warning to potential creditors that you’re living beyond your means and may not be able to pay because you’re using all of the credit available to you.
Credit utilization should be below 10 percent. Maxing out credit cards can drop a credit score 30-45 points, according to FICO.
Not paying medical bill
Like a late credit card payment, a medical bill can be just as easy to forget or put aside for awhile because you can’t afford it.
Half of all collections reported to credit bureaus are for medical bills, according to the a report by the Consumer Financial Protection Bureau. The median balance of a collection is only $207.
One unpaid medical bill can drop a credit score by 100 points. Once a collection hits your credit report, it usually stays there for seven years — even if you pay it off sooner. That could be a long seven years with a lousy credit score because you forgot to pay a medical bill.