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Maintain a Healthy Credit Score with O1ne Mortgage

Good credit is essential for qualifying for credit cards and loans. Just like staying physically fit, maintaining your credit score requires consistent effort. Here are 11 actions that can lower your credit score and tips on how to avoid them.

1. Making Late Payments

Lenders report your accounts to major credit bureaus like Experian, TransUnion, and Equifax. A payment that is 30 days past due is reported as late and stays on your credit report for seven years. Since payment history accounts for 35% of your FICO® Score, even one late payment can significantly impact your score. If you miss a payment, pay it as soon as possible and set up reminders or autopay to avoid future late payments.

2. Using Too Much Credit

Your credit utilization ratio, which is the percentage of your available revolving credit you are using, is crucial. Lenders look at this ratio across all your accounts and for each individual account. Keeping your credit utilization under 30% is advisable, and under 10% is even better. This ratio accounts for 30% of your FICO® Score.

3. Applying for Too Many Credit Accounts

Each time you apply for credit, a hard inquiry is made on your credit report, which can lower your score. Multiple hard inquiries in a short period can have a more significant impact. To minimize this, get prequalified using a soft inquiry, which does not affect your credit score. If you need to apply for multiple loans, try to do so within a 14- to 45-day window to limit the impact on your score.

4. Closing Credit Accounts

Closing a credit card can reduce your available credit and increase your credit utilization ratio, potentially lowering your credit score. It can also shorten your credit history and reduce your credit mix, which together account for 25% of your FICO® Score. Unless there is an annual fee, it may be wise to keep the account open.

5. Having Your Credit Limit Lowered

Late payments, high credit utilization, or inactivity can lead to a lowered credit limit, which can increase your credit utilization ratio and hurt your score. Pay your bills on time and keep your credit utilization below 30% to maintain your credit limits.

6. Defaulting on a Loan

Defaulting on a loan has a severe negative impact on your credit score and can lead to repossession or foreclosure. To avoid default, contact your lender to discuss changing your payment schedule or consider refinancing your loan. Credit counseling can also provide valuable advice.

7. Cosigning on a Loan That Becomes Delinquent

Late or missed payments on a loan you cosigned for can appear on your credit report. Before cosigning, consider the borrower’s reliability and check your credit report regularly to monitor for late payments.

8. Accounts in Collections

Debts that are seriously past due may be sent to collections, further damaging your credit score. If you are struggling to make payments, contact your creditor immediately to discuss options or seek help from a reputable credit counseling agency.

9. Debt Settlement

Debt settlement can be almost as damaging to your credit as bankruptcy due to missed payments. Consider a debt management plan with a nonprofit credit counseling agency instead, which can help you repay your entire debt and minimize harm to your credit score.

10. Bankruptcy

Filing for bankruptcy should be a last resort as it causes significant damage to your credit score and remains on your report for seven to ten years. Explore other options like increasing your income, implementing a debt repayment strategy, or seeking credit counseling.

11. Inaccuracies on Your Credit Report

Incorrect information on your credit report can harm your score. Obtain a free copy of your credit report from the three major bureaus at AnnualCreditReport.com and dispute any inaccuracies.

The Bottom Line

Maintaining good credit habits can help you improve a poor score. Bringing late accounts up to date, paying bills on time, and minimizing credit utilization show lenders that you can manage your finances responsibly.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. Our team is here to help you navigate your financial journey with confidence.

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