Factors That Can Lower Your Credit Score

Credit reports are a tool that lenders use to determine your financial reliability. Of course, all of us wish we did not have a negative mark on our credit; however, many consumers do have at least a blemish or two listed on their credit report. By having negative marks on your credit lead to higher interest rates, credit denial for a loan, credit card, or mortgage. Following are the factors that cause a bad credit score:

Bills that Are Paid Late

Always ensure that your monthly credit card bills, your car loan, and mortgage are paid on time. If you have one or two late payments this can negatively impact your score. If you are having financial difficulty paying these expenses, contact your creditor immediately.

Not Paying your Bills or Not Paying the Minimum Amount

It is quite obvious that if you fail to pay your monthly obligations it will affect your credit score. Many consumers believe if they just "pay what they can" this will avoid negative impacts to the credit report. This is false; in fact, by not paying the full minimum amount required still causes the account to be past due and negatively report to the credit bureau. It is also important to remember that negative marks on your credit can expose consumers to legal action, judgments, and even foreclosures.

High Debt Level

In most instances, debt is measured according to your income. The "rule of thumb" is not to incur debts that are equal or are more than 1/3 of your annual income. What this means is; if you make 30K annually, the preferred amount is 10K; if you make 100K this amount increases to 33K. Something else to consider; in most cases student loans and mortgages are not typically factored into this amount.

Having Too Many Outstanding Credit Cards

Many lenders will look at the number of credit cards versus the balances on these cards when making credit decisions. If you have too many credit cards this can lower your credit score. It is definitely easy to have three to four regular credit cards and a half dozen of department store credit cards. Although the balance may be zero or relatively low; these cards can be maxed out at any time; this is the lenders viewpoint. In addition, by maxing out your credit lines gives you less money to pay off your debts.