“Charge” It to Experience – How to Ruin Your Credit
February 16, 2009 by MOYMJennifer
Filed under Credit
Checkmate! One false move and you’re doomed! It takes a million acts of kindness to build a good reputation but only one mistake to wreck it. Better ask Michael Jackson about that.
Let the rule of thumb on credit be known. “A bad credit rating means higher interest rates and ultimately less money saved for you.”
Kill Your Credit Rating
Pay late: Did you know that delinquent payments are a surefire way to ruin your credit score? With one missed payment, you would be categorized as a different class of customer – a late-paying customer who will get penalized. A late payment may be forgiven – your late fee may be waived and the interest rate may be brought back from a delinquent level to standard – but it’s not forgotten. It’s noted down in your records. The next time you’re late paying your dues, you’re not likely to be forgiven again. Your late fee will not be waived and your rate will not be brought down until after some time; in any case, any special rates – an introductory balance transfer rate or a 0% interest purchase rate – that you may have enjoyed before you paid late the first time will probably be the first of your ‘privileges’ gone the first time you paid late.
Apply for several credit cards or loans in a span of few months: Applying for a credit card account or a loan one after another and with a short time interval in between each application is a signal to the lending institutions that you need money badly. This, to them, is a sure sign that you are a bad credit risk. The credit bureaus will be informed of each application, especially of each rejection, and you can watch your credit rating go down the drain.
Max out your credit line: Does maxing out your credit limit help establish a good credit rating? Absolutely not! Finance experts advise credit card customers to maintain their balances at levels that are no higher than 35 percent of their credit line. If you are always maxed out, one unthinking expense will push you over your limit. Going over your limit carries stiff penalties, and getting assessed a credit risk in one institution can lead to a rate hike on your other accounts.
Pay with a no-good check: You always pay your bills on time. One time though, you made out a check to your credit card, lender or service provider from a closed checking account or one with insufficient balance in it. This one mistake will set a series of bad events in motion. First, you will be charged by the intended recipient with a no-good check fee. Then you will be late paying your bills, which means your credit card company, lender or service provider will charge you a late fee. Then your bank will charge your bank account with a service fee for a refused payment. Of course, with all these going on, there’s a good chance your interest rates will increase and your special rates will expire in result. There goes your good – or rather formerly good – credit then.
Ignore bills and fines: Do you have unpaid petty fines such as parking tickets and library fines? Do you ignore your billing statement from credit card companies, loan companies and service providers? Note that municipal governments nowadays are sending their outstanding fines to collection agencies; not all of them do, but some definitely do. You just don’t know who is and who is not reporting. Lending and financial institutions also have their own in-house collections department; they can also let a third-party collection agency collect on their behalf. One thing is for certain though: collection agencies can crash your credit rating to death.
Erroneous reports: Erroneous reports from anyone – government, service providers, department stores, financial institutions, etc – about your supposedly unpaid debts, open credit card accounts, unpaid and delinquent loans, unpaid bills, etc. are going to stay in your credit report and weigh down your credit rating until they are corrected. Thus, one sure way of ruining your credit is by not having mistakes corrected – and making sure wrong records and reports stay off permanently (they can come back if you do not monitor your report). You should keep an eye on your credit report; you can order a free copy from the credit bureaus once a year.
Related posts:
The only one reaching the American dream is the executives at the credit card companies. Stop using your cards, pay off your debt and live within your means.
I ruined my credit while in college by paying bills late or not paying at all and maxing out my credit lines. My husband had to take on some of my debt when we were married. Now it is all paid off but I wish I had understood what a big impact credit would have on my life. If you have a teenager talk to them about being fiscally responsible!