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Your credit score plays a significant role in everything from your monthly expenses to your ability to purchase a home. If you’ve built a strong score, you’ll want to protect it. However, some common financial mistakes can severely damage your score, and Credit.com explains the impact these can have.
There are several common financial errors that can hurt anyone’s credit score, but the impact can be especially significant if your score is high. Credit.com outlines the potential damage you can experience in the following situations:
First Missed Payment:
Payment history is the most critical factor in major credit scoring models. As a result, missing a payment for the first time can have a substantial effect. A recent late payment can drop your FICO score by as much as 90 to 110 points if it was initially 780 or higher.
Debt Settlement:
Allowing a debt to go into settlement can also cause a significant decrease in your score, potentially dropping it by 105 to 125 points, according to FICO’s scenario testing.
Using Up Your Entire Credit Limit:
While not as damaging as a missed payment, maxing out a credit card can still lead to a notable decline. For someone with a solid score of 780, this could result in a drop of 25 to 45 points, according to a
test scenario from credit scoring model FICO.
Even with a fair or poor credit score, you’ll experience a decline, and you can find additional details over at FICO. Regardless of your score, it's crucial to avoid these habits. For more information, check the link below.
Photo by Morgan.
