How To Ruin Your Credit Score

Having a good credit score is important for various reasons. For one thing, it will pay a big role in determining your mortgage options if you want to own your own home someday. A good score could translate into mortgage options with lower interest rates while a poor credit score could translate into mortgage options with higher interest rates as well as heftier down payments, which may make it more difficult to buy a home. Here five things that some people don't realize are ruining their credit score.

A Debt-Free Lifestyle

While it's true that drowning in debt is a losing proposition, a debt-free existence is a credit score killer. Case in point: Lenders will have no idea how reliable people are if these people don't have any debt. What people need to do is have a track record of paying back debt. A credit card purchase of a reasonable amount, followed my regular monthly payments, will help give lenders confidence in borrowers. As a good repayment track record is established, people will gradually see their credit scores improve.

Too Much Plastic

While a no-debt lifestyle is a no-no, people who overuse credit cards will see their credit score hurt as well. Another thing to keep in mind is that people can see their credit score hit even if they pay off the balance owing by month's end. So it's best to avoid accumulating an excessive amount of debt at all costs.

The Default Dilemma

Any sort of default move, such as a home foreclosure, is the sort of credit score killer that should be avoided at all costs. Going this route will take a huge toll on the defaulter's credit score. People who are staring down a default situation should do everything in their power to find another solution since defaulting will hit their credit score with the force of a sledgehammer.

The Drain of Late Payments

Another way that people can damage their credit score is by being late with their credit card payments. In fact, a single late payment can have a disastrous impact on the credit score front. So it's best to pay on time... all the time.

Line of Credit Issue

People who open a line of credit will, by so doing, lessen their credit score. The reason for this is that people are usually at an elevated risk level as soon as they open a new account. It's also important to know that the process of opening a credit line requires that the provider check the credit score of people seeking the credit line. This process, which requires a so-called hard inquiry, will dock the applicants' credit score by a few points.

Having a good credit score is important, but achieving and maintaining the ideal is only possible if people understand the sorts of things that can work against them. People who arm themselves with the right information will be able to not only build up a good credit score, but also keep it at a suitable level.