While it takes years to build great credit, it only takes a few months to destroy it. That’s why if you are new to the “game of credit” and how it affects your life–or if you are attempting to rebuild bad credit after making too many credit mistakes–it’s a good idea to avoid some of the triggers that can seriously and negatively affect your credit score for a long time.
Mistake #1: Failing to make your payments on time.
Making a payment on time is the most significant factor affecting your credit score. Late payments will affect your credit score based on the frequency and the recentness of the late payment. In fact, your first 30 day late payment can drop your credit score 100 points or more. If you happen to miss your payment by a day or two, don’t worry, this isn’t such a big deal. However, once you reach the 30-day mark, expect a decrease to show up in your credit score for missing the payment deadline. If your missed payment is due to not having the financial means to pay your creditor, instead of ignoring the situation, call them and discuss your circumstances. It is possible that your creditor will delay informing the credit bureau of your late payment in order to give you a chance to catch up.
Mistake #2: Applying for too many credit cards.
When you’re getting a mailbox full of great offers such as 0% interest for a limited time and 0% balance transfers, it’s hard to resist not accepting them. However, what is a good situation can quickly turn into a dangerous one if you end up with too many credit cards at once, particularly if they are credit cards for particular stores. Having multiple credit cards makes it tempting to put balances on each, so this situation requires careful discipline. If you don’t think you will be able to maintain that discipline, it’s best to avoid the situation altogether.
Mistake #3: Maxing out all of your credit cards.
This mistake commonly follows those who make mistake #2. Maxing out your credit cards lowers your credit score significantly and creates a situation in which many find it difficult to make payments on time. Remember that the amount that you owe on credit cards and other revolving accounts has a huge impact on your credit report. In this way, these three mistakes mentioned form a vicious cycle that is hard to escape, particularly if you are in a period of attempting credit repair.