There are a few things that you can do that will immediately kill your credit score, dips for 50 to 100 points or more depending upon where you started. And while you probably would never want to do this on purpose, here are the top things that will kill your score.
· Maxing out your credit limits. Maxing out a credit card or any type of revolving credit will almost instantly crush your score. When your debt to available credit ratio is maxed out, you have nothing….but of course, the debt from the maxed out card.
· Late payments. Yes, this one should be obvious but the fact is that just one 30-day late payment can take anywhere from 60 to 110 points from your score. And you need to be wary, because it is possible and even legal for a lender to report you as 30-days late when you are only past the due date by a few days, like 1 to 15 days rather than really 30. Don’t miss your payments. Instead get them there ahead of time, your credit score will Thank you.
· Debt settlement. It may be appealing to think you can settle your debt for pennies on the dollar and of course, you can do it, it can be done. But don’t do it and expect to come away unscathed, because a debt settlement can reduce your score by 45 to as many as 125 points.
· Foreclosure. This one seems a bit unfair in the current times. Not that it’s not a bad enough infraction to drop your credit score, but rather that right now in the current real estate market, where people owe more than they can sell for, where they can’t seem to sell at all, and where the value on something that at least most expected would be stable and it has crashed, it seems rather frustrating that it can hurt your credit score so much, when really, you would have sold the damn home if only you could have. But it does. A foreclosure will drop your score by 85 to 160 points. A short sale isn’t much better (even though, again you would have sold it yourself if you could have!) but you may have a better chance of getting another mortgage sooner with a short sale rather than a foreclosure. Either way you are probably looking at 3 years or more before you can qualify for a new mortgage.
· Bankruptcy. This is the big one. A bankruptcy can shave as much as 130 to 240 points off your score. Still, if you can’t pay, it may be a better option because at least you start with a clean slate.
These numbers are just estimates of the impact on your score and you may fare better or worse.
But the good news is that you can rebuild, repair and improve your credit over time and with some strategic credit repair techniques.
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