Impact of Credit Mistakes on Your FICO Sc
Did you know that missing a monthly bill payment could have a direct impact on your credit score? Sometimes losing out on too many credit points could end in a foreclosure or bankruptcy. While some situations may cause a slight dip in your credit scores, other difficulties can drop the score to an alarming level. Since this score is vital in calculating the creditworthiness of individuals, it is important to know how credit mistakes or financial blunders can cause the FICO score to descend considerably.
Let’s take a closer look at the different examples of credit mistakes and how they tend to bring the FICO score down:
- Maxed Out Credit Card – Your scores could go down if you max out your credit card. A maxed out card is an indication of financial trouble, not to mention that going over the credit limit could land the holder in financial stress. One reasonable solution is to transfer credit card balances, which can spread the debt across more cards so that the holder benefits from a low introductory interest rate.
- Late Payment – Late payments are very common mistakes that affect credit scores. However, a delay of just a few days will not be recorded in the credit reports, as creditors only make a note of payments that are overdue by more than 30 days.
- Debt Settlement – When you negotiate with creditors to lower the amount you owe, it might seem that you are saving cash. In reality though, this might be a costly solution because your credit score goes down. You may also have to face some tax consequences.
- Bankruptcy – Regarded as a last resort, this option is usually preceded by multiple late payments and the verge of foreclosures. Credit scores also tend to be low in such cases. Bankruptcy can still have a major impact on your credit score and also affect your capacity to acquire credit for several years.
Always remember that responsible use of credit can improve your credit score. Credit debt solutions can help you determine whether your credit file holds accurate information or not. If there is inaccurate or negative information, you can inform your creditor and have the error corrected. There are also services available to monitor your credit file. You can also make use of consumer debt solutions or consulting services to gather better ideas for effectively managing your FICO score.
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