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18 things that hurt your credit score

A guide to sorting out FICO’s complex credit scoring formula

Summary

Hard inquiries, missing a payment and maxing out a card hurt your credit score. What else does?

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When someone pulls your credit report, it dings your credit score – unless that someone is you or a lender evaluating your credit for promotional purposes.

This is just one of the many complex rules baked into FICO’s traditional method for calculating your credit score. The formula can be a bit confusing to consumers, outside of the more obvious maxims. For instance, missing a credit card payment is bad, and keeping your card balances low relative to your overall available credit is good.

However, many aren’t aware that applying for a new credit card only hurts a little – unless you do it a bunch of times within a 12-month period. And if five different prospective mortgage lenders access your credit report within a 30-day period while you’re shopping for the best interest rate, that counts as only one credit check, or hard pull.

Got all that? It’s a lot to take in, so we’ve compiled a list of 18 things that hurt your credit score, broken down within each of the five components that make up your scores. (Also see this list of 16 things that don’t hurt your credit score.)

What hurts your credit score 

Payment history

35%

 

  • Missing a card or loan payment
  • Collections and charge-offs
  • Bankruptcy
  • Foreclosure
  • Deed in lieu
  • Short sale
  • Tax lien
  • Debt settlement
  • Refinancing a home, student or car loan
  • Being an authorized user on someone’s “bad” account
  • Not having a credit card
  • Credit report errors

Credit utilization

30%

 

  • Missing a card or loan payment
  • Maxing out a credit card
  • Debt consolidation
  • Refinancing a home, student or car loan
  • Canceling a credit card
  • Being an authorized user on someone’s bad account
  • Credit report errors

Length of credit history

15%

 

  • Applying for too many credit cards
  • Refinancing a home, student or car loan
  • Canceling a credit card
  • Not having a credit card
  • Credit report errors

New credit

10%

 

  • Hard inquiries
  • Applying for too many credit cards
  • Debt consolidation
  • Refinancing a home, student or car loan
  • Errors in your credit report

Credit mix

10%

 

  • Applying for too many credit cards

1. Missing a card or loan payment.

Payment history accounts for 35 percent of your FICO score. According to FICO, a payment that is 30 days late can cost someone with a credit score of 780 or higher anywhere from 90 to 110 points. However, card issuers typically don’t report late payments to the credit bureaus until they’re 60 days late. A missed payment can stay on your credit report for up to seven years.

2. Maxing out a credit card.

Credit utilization accounts for 30 percent of your FICO score. The lower your balances are relative to your overall available credit, the better your score will be. A maxed-out card can lower your credit score by 10 to 45 points.

3. Hard inquiries.

A hard inquiry occurs when a lender pulls your credit report for review when applying for a loan or credit card. According to FICO, only inquiries that result from applying for credit ding your credit score. For most people, a hard inquiry costs five points or less and stays on your credit report for two years, but will only impact your credit score for one year.

4. Applying for too many credit cards.

If you apply for several cards in the span of a few months, the point losses from multiple hard inquiries add up. It can also give lenders the impression you’re desperate for credit. FICO says consumers with six or more inquiries can be up to eight times more likely to declare bankruptcy.

5. Collections and charge-offs.

A collection occurs when a creditor either sells your unpaid debt to a third party or hires an outside firm to collect the payment. A “charge-off” refers to when a creditor removes an unpaid debt from its books, typically when it reaches 180 days past due. The more recent a collection account, the more it will hurt your credit score. A collection can reduce a high credit score (700 or above) more than 100 points. Collections can stay on your credit report for up to seven years. (Note that the widely-used FICO Score 8 ignores collections in which the original balance is less than $100.)

6. Bankruptcy.

Declaring bankruptcy has the biggest credit score impact, costing anywhere from 130 to 240 points. A bankruptcy can stay on your credit report for up to 10 years.

7. Foreclosure.

A foreclosure can cause a credit score to drop by as many as 160 points and can stay on your credit report for up to seven years.

8. Deed in lieu.

A deed in lieu is a process by which a homeowner can avoid foreclosure by turning the property over to the mortgage lender. The lender then sells the property to cover its loss. It can lower your score by as many as 125 points, on top of any damage from missed mortgage payments.

9. Short sale.

When a mortgage lender accepts a payoff of less than the original balance when the “underwater” home can’t be sold at a price sufficient to pay off the remaining debt, it can lower your score by as many as 125 points.

10. Tax lien.

A lien is a public record of an unpaid tax debt. Failure to pay your taxes can damage your score as badly as a bankruptcy (which can cost 240 points), or it can have no impact at all. In July 2017, the three major credit bureaus began to remove and exclude all tax lien information that doesn’t conform to new reporting standards from consumers’ credit reports.

11. Debt settlement.

Settling a debt with a creditor for less than what was originally owed can lower your score by anywhere from 45 to 125 points.

12. Debt consolidation.

Moving your card debts into a consolidation loan could cause a slight drop in your score because of the hard inquiry, but may help your score overall as your card balances are paid off with the loan.

13. Refinancing a home, student or car loan.

According to FICO, refinancing a loan can have a small impact on your credit score if it appears on your credit report as the same loan with changes. In this case, your score may take a slight hit from the new hard inquiry.

14. Canceling a credit card.

Closing a card account can decrease your overall credit utilization ratio, potentially lowering your credit score, as well as shorten the overall age of your credit history if you’ve had the card a long time.

15. Being an authorized user on someone’s “bad” account.

When added as an authorized user on someone else’s credit card account, you inherit the payment history of that card. This can give your credit a boost if the primary user has never missed a payment and keeps the card’s balance low. But the opposite can happen if the account is delinquent, the balance is high or it has any other score-killing negative items.

16. Using only one type of credit.

If you want to maximize your credit rating, it’s best to have a mix of credit cards and installment loans. Credit mix accounts for 10 percent of your FICO score.

17. Not having a credit card.

To qualify for a FICO score, you must have at least one credit card or loan account that has been open for six months and has been reported to the credit bureaus within the past six months.

18. Credit report errors.

Credit reporting errors can damage your ability to qualify for credit cards and loans. Consumers should check their credit reports regularly and dispute any errors with the credit bureaus and the creditor that supplied the inaccurate information.

See related:   What is a good credit score?, Zero to 750: What’s the fastest route to a high credit score?

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