Silly Mistakes That Will Ruin Your Credit Score

Having a bad credit score can affect your interest rates, loan approvals and even rental applications. Avoid the following mistakes or else you will find that financial irresponsibility can cost a pretty penny.

Co-signing loans for family and friends who are not reliable with bill paying-
If the person whom you signed for misses payments or stops making them all together, it can ruin your credit. Additionally, if the person fails to give you fair warning, you may only discover the mishap when it's too late and the damage has already been done.

Ignoring your bills- Even if you think they are incorrect, they should never be ignored. Call the entity to avoid them sending the bill to a collections agency. Ignoring bills will cause your mortgage company, utilities company, phone company, credit card companies, etc. to inform the three major credit reporting bureaus that you’re not paying your bills. Your credit score will tank. If you are backed in a corner and cannot afford to pay the bills on time, it is worth making a phone call and being honest. Sometimes they are understanding and will strike a deal with you.

Applying for multiple credit cards and lines of credit at once- Having too many new accounts, all opened around the same time, will lower your average account age. This will have a large effect on your score if you don't have a lot of other credit established. Also, rapid account buildup can look risky if you are a new credit user.

Avoiding Credit Cards altogether- Credit cards help you build and establish credit, if you are responsible by paying your bills on time. Someone with no credit cards, tends to be higher risk than someone who has managed credit cards responsibly.

Maxing out your credit cards- Generally, it is a good idea to keep credit cards away from their limit to avoid the risk of late payments. High balances lower credit scores so do not get yourself backed into a corner with bills higher than you can pay on time. FICO, the most widely used credit score system agrees. FICO's model is heavily influenced by your credit utilization ratio. This is the portion of your available credit limit you're actually using. The formula likes to see a wide gap between your balances and your limits.

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