When it comes to building and maintaining credit scores, it’s important to know what kinds of things can hurt your credit score. Your credit score is important for lenders to be able to evaluate how risky it is for them to lend you money. Your credit score can also be used for decisions regarding housing. To keep maintain your excellent credit score high or improve a damaged credit score it, having knowledge of how the credit score system works is important.

Here are seven things that can lower your credit score:

1. Late Payments

Late payments can hurt your credit score when the payment has not been received thirty days or more after the due date. This means if you’re able to make your payment before the 30-day mark, you won’t be reported to the credit bureaus. After 30 days, if the payment has not been made, your credit score will decrease.

2. Charge-offs

A charge-off occurs when a debt has gone unpaid or the minimum payment has not been submitted for a long while. When this happens, the debt is considered “uncollectible”. Charge-offs happen after at least 120 days of nonpayment for installment loans or 180 days of nonpayment on credit cards.

Having a debt charged-off doesn’t mean you’re off the hook. You’re still responsible for the payments until the it’s paid off or cancelled by the creditor. Charge-offs are often sold to a collection agency and show up on your credit report as a debt collection. These types of blemishes stay on your credit report for seven years before they fall off.

3. Debt Collections

Once a debt has been charged-off and sent to a collection, it will hurt your credit score. The better your score at the time the collection goes on your credit report, the more you can expect your score to decrease. Debt collections typically stay on your report for seven years. It is very important that you check your report for errors because they do happen and you want to make sure negative items like this actually belong to you.

4. High credit card balances

Thirty percent is the magic number. Keeping the balances on your cards 30% or lower is ideal. This shows lenders that you are using your credit responsibly. If your card balances are above 30% of the total credit limit available on that card, focusing on bringing your balance down is a good way to bring your score up.

5. Inquiries

There are two kinds of inquiries that are used to investigate your credit history – soft inquiries and hard inquiries. Soft inquiries come from your own credit checks and businesses who check your credit report for promotional purposes. Credit card pre-approval letters, for example, are the result of soft credit inquiries. These soft inquiries don’t affect your credit score.

Hard inquiries, on the other hand, happen when you apply for a loan or line of credit, that is a hard pull and you can expect a small decrease in score. It will remain on your report for two years, but only those made within the past 12 months affect your credit score.

6. Bankruptcies and Tax Liens

Filing bankruptcy or having a tax lien against you will cause a severe blemish on your report for a very long time. Expect these things to remain on your report for up to 10 years.

7. Repossessions and Foreclosures

Repossessions and foreclosures hurt your credit score tremendously. They both will stay on your credit report for seven years and will consequently affect your future lending options.

Once you know what hurts your credit score, you can make better decisions about how to handle your credit and loan accounts. To achieve an excellent credit score, it’s critical to avoid any mistakes that will hurt your credit score.

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